Evaluating a Corporate Strategy
-A Case Study of Länsförsäkringar
Helena Andersson
Gustaf Jansson
Master’s thesis · 30 hec · Advanced level
Agricultural Programme – Economics and Management
Degree thesis No 735 · ISSN 1401-4084
Uppsala 2012
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Evaluating a Corporate Strategy
-A Case Study of Länsförsäkringar
Helena Andersson
Gustaf Jansson
Supervisor:
Bo Öhlmér, Swedish University of Agricultural Sciences,
Department of Economics
Examiner:
Karin Hakelius, Swedish University of Agricultural Sciences,
Department of Economics
Credits: 30 hec
Level: A2E
Course title: Independent Project/ Degree Project in Business Administration
Course code: EX0536
Programme/Education: Agricultural Programme - Economics and Management
Faculty: Faculty of Natural Resources and Agricultural Sciences
Place of publication: Uppsala
Year of publication: 2012
Name of Series: Degree project/SLU, Department of Economics
No: 735
ISSN 1401-4084
Online publication: http://stud.epsilon.slu.se
Key words: Strategic drift, Insurance company, Service sector, Strategy, Customer value
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Acknowledgements
We would like to express our gratitude towards those people who have helped us and
supported us during the process of writing this thesis. First of all, we would like to thank
Professor Bo Öhlmér, Department of Economics at the Swedish University of Agricultural
Sciences for his prudent advise and commitment. We would also like to thank our families for
all their support.
Further, we are grateful to all respondents who have participated in the study and contributed
with both their time and efforts. Finally, we would like to acknowledge Länsförsäkringar
Uppsala, and especially Erik Ekström and Anders Johansson, for their support but also for
providing much of the foundation of the thesis.
Uppsala, June 2012
______________________
Helena Andersson
______________________
Gustaf Jansson
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Abstract
The Swedish agricultural sector is currently undergoing a substantial structural change. The
number of farm enterprises is continuously decreasing and the average farm size is increasing.
In combination with increasing number of competitors in the insurance market, the
competitive rivalry within this market has increased significantly. With this knowledge in
mind, Länsförsäkringar Uppsala initiated this study, which aims to provide an understanding
of customer’s view on customer value, related to agricultural insurance and financing. The
intention is to investigate if Länsförsäkringar’s view on customer service corresponds with the
customer’s view and whether there are any signs of strategic drift. The empirical data was
collected in form of a case study. This was achieved by studying Länsförsäkringar’s strategic
framework as well as performing three interviews within the company. Further, the
customer’s view on customer value was collected in ten interviews carried out with current
and former customers. The empirical data was then put in relation to theories and literature on
strategy, resource-based theory on competitive advantage, and customer orientation.
The results indicate that there are no immediate signs of strategic drift. The results also show
that Länsförsäkringars strategy is well suited for the company’s characteristics and resources.
However, even though the strategy corresponds well to the customer’s view on customer
value, the empirical data indicate that the implementation of some parts of the strategy still
needs attention. If more attention is not focused on these factors, there is an increasing risk of
strategic drift in the future. The most important factors to focus on are;
•
•
•
•
Personal relation to the customers: One of the most important values for the
customers is to have a personal relation to the company. To achieve this, it is of great
importance that the customers are aware of who their contact person is.
Enhance synergies: It is of great importance to enhance the synergies between bank
and insurance operations and to convince the customers that this is a service that is
superior to the competitors’. The key factor to achieve this is to increase efficiency
and collaboration in-house.
The local attachment: It is very important to communicate the benefits of
Länsförsäkringars local attachment. It is also important to enhance these benefits.
This can be achieved by mobilise the local representatives, and make them more
active in the market.
High quality: Länsförsäkringar has chosen a differentiation strategy, that focus on
high quality over low cost. In order to maintain credibility, it is of great importance to
never fail in the delivery of this quality. Such a failure can in log run undermine the
company’s reputation.
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Sammanfattning
Jordbrukssektorn i Sverige genomgår för närvarande en betydande omstrukturering. Antalet
lantbruksföretag minskar kontinuerligt samtidigt som den genomsnittliga gårdsstorleken ökar.
Denna omstrukturering har, i kombination med att antalet konkurrenter på marknaden för
lantbruksförsäkringar ökar, lett till en kraftigt ökad konkurrens på denna marknad. Det är med
detta i åtanke som Länsförsäkringar Uppsala tog initiativet till denna studie. Syftet med
studien är att skapa en förståelse för kundernas syn på kundvärde när det gäller
lantbruksförsäkring och finansiering av lantbruksföretag. Avsikten är att undersöka om
Länsförsäkringars syn på kundservice överensstämmer med kundernas syn samt om det finns
några tecken på strategisk drift. Det empiriska materialet samlades in genom en fallstudie.
Detta genomfördes genom att studera Länsförsäkringars strategiska dokument, dessutom
genomfördes tre intervjuer med anställda. För att erhålla kundernas syn på kundvärde
genomfördes vidare tio intervjuer med nuvarande kunder samt kunder som har lämnat
Länsförsäkringar. Det empiriska materialet sattes därefter i relation till teorier och litteratur
inom området strategi, resursbaserad teori på konkurrnsfördelar samt kundorientering.
Resultatet tyder inte på några uppenbara tecken på strategisk drift. Vidare visar resultatet att
Länsförsäkringars strategi är väl lämpad för företagets egenskaper och resurser. Även om
strategin stämmer väl överrens med kundernas syn på kundvärde, indikerar det empiriska
resultatet dock att implementeringen av vissa delar av strategin kräver fortsatt fokus. Om
Länsförsäkringar inte fokuserar på dessa delar ökar risken för strategisk drift i framtiden. De
viktigaste faktorerna för Länsförsäkringar att fokusera på är;
•
•
•
•
Personlig relation till kunderna: Ett av de viktigaste värdena för kunden är den
personliga relationen till företaget. För att uppnå detta är det viktigt att kunderna är
medvetna om vem deras kotaktperson är.
Förbättrad synergi: Det är av stor vikt att arbeta för förbättrad synergi mellan bank och
försäkring och därmed övertyga kunderna om att denna service är överlägsen
konkurrenternas. Nyckelfaktorn för att uppnå detta är att öka effektiviteten och
sammarbetet internt.
Lokal prägel: Det är mycket viktigt att kommunicera fördelarna med
Länsförsäkringars lokala prägel. Det är också viktigt att förstärka dessa fördelar. Detta
kan uppnås genom att mobilisera de lokala ombuden, samt göra dessa mer aktiva på
marknaden.
Hög kvalitet: Länsförsäkringar har valt en differentieringsstrategi och fokuserar på
hög kvalitet framför ett lågt pris. För att bibehålla trovärdigheten är det av stor vikt att
aldrig misslyckas att leverera denna kvalitet. Om företaget misslyckas med detta kan
det, på längre sikt, underminera företagets rykte.
v
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Table of Contents
1 INTRODUCTION .............................................................................................................................................. 1
1.1 PROBLEM BACKGROUND ................................................................................................................................ 1
1.2 PROBLEM ....................................................................................................................................................... 2
1.3 AIM AND DELIMITATIONS ............................................................................................................................... 3
1.4 OUTLINE ........................................................................................................................................................ 4
2. LITERATURE REVIEW AND THEORETICAL PERSPECTIVE ............................................................ 5
2.1 LITERATURE REVIEW ..................................................................................................................................... 5
2.1.1 Länsförsäkringar .................................................................................................................................... 5
2.1.2 Sustaining competitive advantage .......................................................................................................... 7
2.1.3 Customer orientation ............................................................................................................................. 7
2.1.4 Structural changes in the agricultural market ....................................................................................... 8
2.1.5 Risk in agricultural enterprises .............................................................................................................. 8
2.2 THEORETICAL PERSPECTIVE ........................................................................................................................... 8
2.2.1 The firm’s environment .......................................................................................................................... 8
2.2.2 Strategy ................................................................................................................................................ 10
2.2.3 Resource-based theory of competitive advantage ................................................................................ 12
2.2.4 Diagnosing strategic capabilities......................................................................................................... 14
2.2.5 Agricultural risk ................................................................................................................................... 15
2.2.6 Managing risk at farm level ................................................................................................................. 16
2.2.7 Insurance.............................................................................................................................................. 17
3 METHOD ......................................................................................................................................................... 18
3.1 GENERAL APPROACH.................................................................................................................................... 18
3.2 LITERATURE REVIEW ................................................................................................................................... 18
3.3 THE EMPIRICAL STUDY ................................................................................................................................. 19
3.3.1 Choice of company ............................................................................................................................... 20
3.3.2 Case study ............................................................................................................................................ 20
3.3.3 Interviews ............................................................................................................................................. 20
3.3.4 Choice of respondents .......................................................................................................................... 22
4 THE EMPIRICAL STUDY ............................................................................................................................ 23
4.1 LÄNSFÖRSÄKRINGAR UPPSALA .................................................................................................................... 23
4.1.1 Products ............................................................................................................................................... 23
4.1.2 Market strategies.................................................................................................................................. 23
4.1.3 Synergies .............................................................................................................................................. 25
4.1.4 Perceived competition .......................................................................................................................... 25
4.1.5 The sales process.................................................................................................................................. 26
4.1.6 The employees ...................................................................................................................................... 27
4.1.7 The local representative organisation.................................................................................................. 27
4.1.8 Social and environmental responsibility .............................................................................................. 27
4.1.9 Why customers choose Länsförsäkringar............................................................................................. 27
4.2 CUSTOMERS ................................................................................................................................................. 28
4.2.1 Products ............................................................................................................................................... 29
4.2.2 Synergies .............................................................................................................................................. 30
4.2.3 Perceived competition .......................................................................................................................... 31
4.2.4 The sales process.................................................................................................................................. 31
4.2.5 Employees ............................................................................................................................................ 33
4.2.6 Structure and organisation................................................................................................................... 33
4.2.7 Social and environmental responsibility .............................................................................................. 33
4.2.8 Brand.................................................................................................................................................... 34
4.2.9 Why customers choose a certain insurance company .......................................................................... 34
5 ANALYSIS AND DISCUSSION .................................................................................................................... 35
5.1 STRUCTURAL CHANGES IN THE AGRICULTURAL MARKET ............................................................................. 35
5.2 PRODUCTS.................................................................................................................................................... 35
5.3 MARKET STRATEGIES ................................................................................................................................... 36
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5.4 SYNERGIES ................................................................................................................................................... 37
5.5 PERCEIVED COMPETITION ............................................................................................................................ 38
5.6 THE SALES PROCESS ..................................................................................................................................... 40
5.7 EMPLOYEES ................................................................................................................................................. 41
5.8 STRUCTURE AND ORGANISATION ................................................................................................................. 42
5.9 SOCIAL AND ENVIRONMENTAL RESPONSIBILITY........................................................................................... 43
5.10 BRAND ....................................................................................................................................................... 43
5.11 WHY CUSTOMERS CHOOSE A CERTAIN INSURANCE COMPANY .................................................................... 43
6 CONCLUSIONS .............................................................................................................................................. 45
BIBLIOGRAPHY ............................................................................................................................................... 49
Literature and publications .......................................................................................................................... 49
Internet ......................................................................................................................................................... 50
Personal messages ........................................................................................................................................ 51
APPENDIX 1: INTERVIEW QUESTIONS AT CORPORATE LEVEL...................................................... 52
APPENDIX 2: INTERVIEW QUESTIONS AT CUSTOMER LEVEL ........................................................ 53
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1 Introduction
The interpretation of the term corporate strategy has undergone a substantial change during
the past decades (Porter, 1996). Previously, its fundamental characteristic of the concept has
been that only one ideal position exists. This position was closely connected to the most
efficient production and use of resources currently possible. This meant a constant
benchmarking of all activities and aggressive outsourcing to achieve efficiency. It was
commonly believed that a competitive advantage depended only on a few key factors. In order
to attain a favourable position in the market, companies had to respond quickly to all
competitive and market changes. This view led to a very high operational effectiveness in the
market, but it also led to very homogenous companies and very strong competition, so called
hyper competition. In the long run, this strategy does not create sustainable values for the
companies, mainly because its rivals can easily duplicate a company’s competitive advantage.
Today, many companies have realized that this is not very profitable. Instead, more resources
have been focused on finding a unique position in the market. This is what is known as
strategic positioning and it attempts to attain sustainable competitive advantage by
distinguishing what is unique about the company. This means performing other types of
activities than the competitors or performing comparable activities in another way.
This thesis will examine the strategy of one of the largest insurance companies in Sweden and
aims to investigate if the current strategy is aligned with the opinion among its customers.
1.1 Problem background
Irrespective of a company’s function, or where in the world it operates, it is always vital to be
aware of its environment and be able to adapt to it in order to be competitive. This is,
however, not as easy as it may sound. The environment is under constant change: for
example, the market demand can shift, new regulations can occur, technology can change and
new competitors can enter the market (Johnson et al., 2011). Understanding environmental
changes and adapting a suitable strategy is essential in order to satisfy customer needs, in
other words, it is essential for survival.
The agricultural sector in Sweden is currently undergoing substantial structural changes,
where the number of farm enterprises is continuously decreasing and the average farm size is
increasing (www, SJV, 2011). The Swedish farmers are more exposed to market conditions,
and thereby market risk, as an effect of the continuous deregulation of global trade in
agricultural commodities (LRF, 2010). Other factors that increase the risk are greater
dependence on the energy market, the oil price, and climate changes (SJV 2010:33 & OECDFAO, 2008). These factors are what drive the structural change since farmers need to
compensate for the increased risk exposure in some way. Risk compensation can be achieved
by diversification, for example entering new markets or producing alternative
products/services, increased flexibility in terms of assets, market, product and time, or by
insurance (Hardaker et al., 1998).
These changes will not only have an effect on the farm enterprises but also on external
stakeholders. For example, they have led to a transformation of the insurance demand and the
demand for financing of farm enterprises. This affects the insurance companies and banks that
operate in the agricultural market. Länsförsäkringar has the leading position within the
agricultural insurance market and is also the fourth largest agricultural bank in Sweden
(Länsförsäkringar Alliance Annual review, 2011). Over time, the company has been a very
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successful actor within the agricultural insurance market but recently it has seen increased
competition. In combination with the structural changes within the agricultural sector, this has
led to a concern within the management whether or not their strategy in this market is
appropriate.
1.2 Problem
“There may be a natural unwillingness by managers to change strategy significantly if it
has been successful in the past, especially if it is built on capabilities that have been shown
to be the basis of the competitive advantage…” (Johnson et al., 2011, p. 160).
The above statement proposes that companies that have experienced long periods of
prosperity are likely to maintain the same strategy or perhaps only change the strategy
incrementally. In a continuous market this might be sufficient over periods of time. At some
point, however, the company’s changes in strategy might not cope with the changes in the
environment. This is not necessarily the result of a sudden environmental change. If the
environmental changes are gradually increasing over time, small changes in strategy are not
enough to keep up with the market. This phenomenon is known as strategic drift.
Strategic drift is defined as the inability to adapt a firm’s strategy to a changing environment
in the long run, due to historical and cultural influences (Johnson et al., 2011 & Johnson,
1992). There are many examples of companies that have experienced difficulties due to
strategic drift. For instance, cell phone manufacturer Motorola held 60 % of the US cell phone
market in the mid-1990s (Johnson et al., 2011). When digital cell phone technology was
introduced in the late 1990s, Motorola was not adapting rapidly enough and the market share
fell to 34 %. Another example is Bang & Olufsen that faced a drastic downturn in
performance in 2007. The reason was not only the financial crisis but also a shift in the
market due to changed behaviour, where customers became more likely to replace this type of
products at a higher rate.
Reasons why managers fail to adapt a strategy that is suitable to a new environment can be
many. For instance, in a company that has been successful historically, managers tend to seek
familiar solutions when the environment is difficult to understand (Johnson et al., 2011).
Another reason can be that the effects of the drift are difficult to see. In the early phase of
strategic drift, the profitability and customer satisfaction can be maintained. This makes it
difficult to detect the problems at an early stage. But as the drift continues, the problems
increase and it becomes more difficult to alter the current strategy in order to get back on
track.
When the effects of strategic drift become evident, i.e. a significant downturn in performance
or customer satisfaction, the company has only one option; transformational change (Johnson
et al., 2011). A transformational change can take several forms, the company can for example
change its products, market and market focus or how it is structured. If the company fails to
carry out necessary changes, the result will be bankruptcy. A good example is the Swedish
company Facit, which dominated the market for mechanical calculators (Torekull, 1982). In
1970, the company had 14,000 employees worldwide and had grown by 500 % over the
previous decade. At this time digital calculators were introduced in the market. The digital
calculators, mainly produced in Japan, were a lot cheaper and more user-friendly. Unable to
compete with the new products, Facit faced bankruptcy only a few years later.
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Länsförsäkringar Uppsala is concerned about whether or not a discrepancy exists between
their strategy and the requirements of their clients in the agricultural market (Pers. Comm.,
Ekström & Johansson, 2012). The agricultural market is of significant strategic interest to
Länsförsäkringar Uppsala, and is responsible for about 10 % of the company’s turnover. The
concern is based on a slight loss in market share together with more aggressive competitors,
especially Dina and Gjensidige. The competitors have increased their market share in all
segments and it is obvious that they are growing stronger in areas where they have opened
branches or where they have established collaboration with other financial actors, such as
banks (Pers. Comm., Johansson, 2012). Due to these developments, Länsförsäkringar Uppsala
want to examine how to adjust their strategy in order to be able to meet future changes in the
agricultural market, as well as increased competition, and maintain their role as market leader.
1.3 Aim and delimitations
The aim of this study is to investigate whether the agricultural division of Länsförsäkringar
Uppsala experiences any strategic drift. The objective is to provide an understanding of the
customers’ view on services related to agricultural insurance and financing. These results are
then compared to Länsförsäkringar’s view on customer services by studying the company’s
strategic framework. The intention is to investigate whether or not they match. If there is any
difference, i.e. signs of strategic drift, the thesis will provide suggestions of how to make
corrections of the strategy. The study aims to address the following research questions:
1. Is Länsförsäkringar Uppsala’s strategic framework suitable given the company’s
characteristics and resources?
2. Which of Länsförsäkringar Uppsala’s services contribute significantly to the perceived
customer benefit?
3. Is Länsförsäkringar Uppsala’s strategy corresponding to the customer’s view on
customer value?
Based on the findings from research question 1, 2 and 3, suggestions of how to alter the
strategy in order to prevent a discrepancy between the customer demands and
Länsförsäkringar Uppsala’s service will be presented.
The study is focused on the agricultural division of Länsförsäkringar Uppsala.
Länsförsäkringar Uppsala has a high market exposure towards agricultural enterprises and is
now experiencing a tougher competition in that market. Combined with a changing structure
in the agricultural market, it is important to study whether the current strategy is suitable for
present and future market conditions. The problem with adapting a strategy to changes in the
environment is relevant to companies all over the world, regardless of market, product, size
etc.
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1.4 Outline
The outline provides the reader with an understanding of thesis structure as seen in figure 1.
The first chapter intends to give the reader the background of the topic in order to motivate
the study. This chapter also states the problem and research questions of the study. Chapter
two includes the literature and theories used as the foundation to answer the research
questions. This chapter provides an understanding of strategy and strategic management and
research of what parts of the firm’s strategic work that is of importance in this kind of study.
The chapter also introduces the background of managing risk at farm level. The method
chapter explains how the study is conducted by clarifying the research methods. The chapter
contains information about the literature review and how the empirical data was collected.
The forth chapter is a recital of the data collected from the interviews.
Figure 1. Illustration of the thesis outline
The analysis and discussion put the problem in relation to the theory and literature as well as
the empirical data. In this chapter, Länsförsäkringar’s strategy is analyzed in relation to the
theories of strategy, the literature on the subject and view on service provided by the
customers. Finally, the sixth chapter attempts to draw conclusions from the analysis in order
to answer the aim of the study.
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2. Literature review and theoretical perspective
2.1 Literature review
2.1.1 Länsförsäkringar
The following information is collected from internal documents, such as Länsförsäkringar’s
strategic platform, brand strategy, and market strategy. The Länsförsäkringar Alliance is
primarily an insurance company but also provide banking-, pension- and real estate brokerage
services to their customers, all under the well-known brand of Länsförsäkringar
(Länsförsäkringar Alliance Annual review, 2011). The organization is one of the main
companies within the Swedish insurance market, with a market share of 28,9 % of the nonlife insurance market and 10,4 % of the life assurance market. The Länsförsäkringar Alliance
is also the fifth largest retail and household mortgage lending bank and the fourth largest
agricultural mortgage bank, in terms of volume. The real-estate brokerage is currently the
third largest brokerage in Sweden.
Länsförsäkringar is focusing on three segments in the market; private customers, where they
primarily focus on housing owners, small self-employed enterprises with 0-49 employees, and
agricultural enterprises. The agricultural segment is in turn divided into three segments; largescale farm enterprises, part-time enterprises and non-active farm owners.
The alliance is customer-owned and operates in 23 local companies with own decisionmaking authority (Länsförsäkringar Alliance Annual review, 2011). The fundamental idea of
this strategy is to ensure the local connection. The local companies have joint ownership in
the service-company Länsförsäkringar AB that provides the local companies with all banking
and insurance resources as well as support. Länsförsäkringar AB in turn, owns a number of
subsidiaries, such as Agria and Wasa Kredit. In contrast to publicly traded companies, a
customer-owned organisation has the advantage that they have no other economic stakeholder
than its customers. Because the customers own the company, all dividends are paid to those
who are actually using the company’s services. According to the strategic platform, this
makes it possible for the management to have a much more long term approach when
deciding strategy, since there are no shareholders that requires quick returns. This is what
creates the core in the organisations genuine customer orientation.
Länsförsäkringar’s brand should represent the local attachment, that the company is owned by
its customers, and that the company has a long-term perspective. The customer is the main
stakeholder, and they should associate the company with praiseworthiness, additional values,
quickly responding and that the company is always nearby. The brand should also signal
trustworthiness, competence and stability.
Länsförsäkringar’s concept is built on the belief that the best way of dealing with customer
oriented services is to be as close to the customer as possible. This means that each local
company has extensive decision-making authority and are responsible for their financial
performance. This makes it possible to adapt to local conditions. The decision making process
is not however without limitations since many of the legal responsibilities lies within
Länsförsäkringar AB. Furthermore, all strategic decisions are made within Länsförsäkringar
AB. Though, all of the local companies are involved in the elaboration of strategies as well as
developing new products and services. The local attachment is the foundation of
Länsförsäkringar’s strategy. This is considered a unique competitive advantage and has been
vital for the company’s success. The fact that the customers are located in the same area as the
5
staff and management of the company creates solidarity and a better overview of the local
conditions, according to Länsförsäkringar strategic platform.
The past decade, Länsförsäkringar has been developing their strategy from a clear product
focus towards increased customer orientation. This is a long term process that attempts to
strengthen Länsförsäkringar’s position in the market. Hence, instead of distinct product
knowledge among the employees, the new strategy aims to increase the customer focus
among the staff. The objective is to enhance customers’ perceived value as well as the
economic value of having Länsförsäkringar as their insurance company.
The division into different segments, i.e. the private segment, owner-operated enterprises and
the agricultural enterprises is based upon the divergent needs of products and services among
the customers. The fact that the needs differ among the customers makes it crucial for
Länsförsäkringar to treat the clients within each segment accordingly. It is also important that
the products are customized for the needs of each segment. Still, it is important to see the
needs of the individual client. This means that the customers in the agricultural segment not
only require insurance- and financing solutions for the enterprise, but also services and
products from the private segment. This is something that needs to be considered in the sales
process.
Customer needs within the different segments are also evolving constantly. In particular, the
agricultural segment is currently undergoing a change, where the large-scale farm enterprises
tend to become more similar to owner-operated companies within other sectors and nonactive agricultural enterprises requires more consulting. Seen in retrospective, this has not
always been the case and the change will demand action from Länsförsäkringar if they want
to maintain their place as market leader.
Länsförsäkringar is providing a complete solution of financial services. This includes
insurance, life assurance, retirement savings, real estate brokerage and banking services. The
idea behind this is to provide customers all financial services under one roof. This is of
strategic importance since many customers consider this to be an advantage. Moreover, it has
shown that a customer that uses all of these services tend to stay longer within the company
and are more willing to buy new products. They also tend to be more content with the
company. Because of this, Länsförsäkringar has introduced the concept of helkund, which
means that customer’s that uses a variety of Länsförsäkringar’s products receives an
economic discount.
Another very important part of Länsförsäkringar’s service is proactive claim activities. This is
important from many perspectives; firstly, to reduce the amount of claims paid out to
customers, secondly, it is a good opportunity to meet with the customers in order to build a
relation to them. This is also an excellent opportunity for selling further products.
The company has pointed out a number of factors that are crucial to handle in order to meet
the future changes in the agricultural market. First, it is essential to focus on enterprises that
are undergoing change, for instance generational change or implementing new activities.
These enterprises are in a situation that requires consulting to develop their business.
Secondly, it is critical to achieve efficiency in the meetings with customers and the following
processes. This is important because it emphasizes the benefits of using only one company for
all financial services; hence, this underlines the benefits of using Länsförsäkringar as partner.
6
Finally, Länsförsäkringar states the importance of high competence in its delivered services in
order to ensure the credibility.
2.1.2 Sustaining competitive advantage
Success is to great extent an effect of a firm’s pertinence in choosing a competitive strategy
(Prajogo & McDermott, 2011). To be able to choose an accurate strategy, it is crucial to
gather and categorise market data in order to understand customer needs. Because of the
existence of resource scarcity, firms are unable to pursue all competitive advantages and they
are therefore required to make trade-offs. Prajogo and McDermott (2011) examine ten factors
that contribute to competitive advantages and thereby affect performance in service
organisations. The study ranks the importance of the ten quality measures by using
Importance-performance analysis (IPA) matrix. The result suggests that firms should put
more efforts and resources on gaining competitive advantages by focusing on cost efficiency
and brand image. A strong brand image is characterized by a good reputation and is wellknown within the target group (Kotler, 2002). Also, the brand should distinguish the company
from its competitors in the eyes of the customer and this difference must be relevant for the
customer. Prajogo and McDermott’s (2011) study indicates that brand image is a very
important factor in determining the difference between low-performing firms and highperforming firms. The reason is believed to be that it is very difficult for customers to assess
the product before the purchase, and therefore they are likely to rely on brand image. Firms
also need to sustain high priority of customer retention and productivity (Prajogo &
McDermott, 2011). The results further suggest that too much attention is focused on
conformance to specification and on-time delivery. Furthermore, firms should maintain a low
focus on speed and service innovation. Finally, the study show the decisive difference
between low-performing and high-performing firms is not the strategy formulation but rather
the strategy implementation.
2.1.3 Customer orientation
Delivering customer value is the core objective of all companies (Nwankwo, 1995). Mainly
because delivering customer value has shown critical for business profitability. Failing to
understand customers' requests can lead to severe problems due to inaction, or at best,
seeming changes in the strategy. These changes can be deceiving since it may create an
illusion of proactivity which in turn will lead to strategic drift. Furthermore, strategic
document often states the customers as the main stakeholder, but judging by history, not all
firms succeed in implementing this stance of policy. Also, if succeeding in implementing
customer orientation, it is often very challenging to sustain this approach, unless focusing a
lot of energy on it.
Nwankwo (1995) proposes a self-auditing framework for evaluating the degree of customer
orientation in an organisation. The framework rests on four main dimensions; definition,
sensitivity, measurement and implementation. Customer definition refers to how an
organization views its customers in order to have a clear idea about the customers and their
needs. The customer sensitivity refers to which extent organizations are able to scan and
understand environmental signals. The framework also states the importance of measurement.
This means that the organization must develop a framework to examine whether the customer
orientation strategy is working as intended. Implementation examines to what extent the
organization has succeeded in turning strategy into action. In this step, the role of the
management is crucial. Managers must be aware of the decisive role of market research in
order to succeed in implementation of strategy.
7
2.1.4 Structural changes in the agricultural market
The global agricultural market is undergoing a substantial change. This depends on many
factors, for example increased market exposure due to deregulations and increased bio-energy
production (OECD-FAO, 2008). According to FAO: s Outlook 2008-2017, the price of
agricultural commodities will continue to fluctuate. This depends on the oil price, climate
changes, the global production and the development of the U.S. dollar. The price also depends
on the income development in India, China, Brazil and other fast growing economies. These
global uncertainties will lead to increased business risk for the individual farmer. Also land
price and the price of other inputs in the production have increased substantially during the
last decade (SJV 2011:33 & Larsson et el., 2011). This has increased the demand for
borrowed capital in the firms, and thereby increased the financial risk. These changes have led
to the on-going structural change among farm enterprises.
In Sweden, the number of active farm enterprises decreased with 23 % between 1995 and
2010 (SJV 2011:33). The production has not however decreased at the same pace. This is an
indication that both size and productivity has increased during the period. The statistics also
show that the number of small enterprises is steadily decreasing while enterprises with over
100 ha of land are increasing. However, the largest number of enterprises operates between 5
and 20 ha. Another illustrative example is visible in the dairy production, where the average
farm size has increased almost 30 % between 2005 and 2010 (www, Svensk Mjölk 1, 2010).
During the same period, the number of farms with 300 cows or more have increased by nearly
80 % (www, Svensk Mjölk 2, 2010).
Many enterprises are also looking towards diversification (SJV JO 47 SM1101, 2001). In
2010, approximately 30 % of all farm enterprises were running other operations beside the
traditional activities. The most common was contracting, but tourism, leasing, and refining of
products was also widely adapted. Alternative operations are most frequent among larger
enterprises, and over half of all companies with over 100 ha have some additional activity.
2.1.5 Risk in agricultural enterprises
Schurle and Tholstrup (1989) examine how farm enterprise characteristics affect the firm’s
business risk. In the study, the relationship between the enterprise’s mix of activities, the farm
size, location, the firm’s financial situation, the age of the operator, and the variance of the
farm income was estimated. The findings points to that the size of the farm was of great
significance. It was clear that as the farm size increased, the relative variability of farm
income decreased. This is important because it further motivates the on-going development in
the agricultural market.
2.2 Theoretical perspective
2.2.1 The firm’s environment
The environment provides the organization with its means for survival, and it presents the
company with threats as well as creating opportunities to increase the company’s profits
(Johnson et al., 2011). Therefore, managers must be aware of, and try to understand the
environment. However, the future can never be foretold with accuracy, but by analysing it and
trying to anticipate it, managers can adapt their operations to it, or in best cases influence the
change.
8
The firm’s environment can be divided into different layers (Johnson et al., 2011). The utmost
layer in the firm’s environment is the macro-environment. This layer consists of factors that
affect most companies, for instance political factors, global economic factors, technological
development and environmental changes. It is important to be aware of these factors in order
to be able to anticipate scenarios that might occur in the future.
The next layer is the industry or the sector. This layer contains all organisations producing the
same service or products as the firm. In this layer, it is possible to determine the competitive
situation in the industry by using the five forces framework (Porter, 1980). The framework is
used for analysing the competitive forces within an industry by determining the threat of
substitutes, the threat of new entries, the bargaining power of the suppliers, the bargaining
power of the buyers, and finally the competitive rivalry between firms within the industry.
The threat of substitutes describes the extent to which it exists substitutes that can decrease
the demand for the firm’s products. The threat of new entries describes how easily new firms
can enter the market, i.e. barriers to entry. The bargaining power of suppliers is for example
determined by the concentration of suppliers. This means that the fewer and more dominant
suppliers, the higher bargaining power they have. It is also determined by how difficult it is
for the firm to switch from one supplier to another. The bargaining power of the buyers is
affected by the number of buyers and also dependence of individual buyers. Further, it is
effected by how easily one buyer can switch to another firm. Finally, the competitive rivalry
in the industry is affected by the mentioned factors. Hence, if the barriers to entry are low, or
the bargaining power of the buyers is high, the higher the competitive rivalry. The five forces
model is used for analysing the attractiveness of the industry and how the competition may
change in the future.
The final layer surrounding the organisation is competitors and the market (Johnson et al.,
2011). Within an industry, there are still a number of different markets, for example, H&M
and Ralph Lauren are active in the same industry but they face different types of buyers. This
layer is useful to structure the company’s closest environment. For instance, the customer’s
preferences and needs differ and thus, it can be useful to divide them into different segments
(Kotler, 1999). Understanding the market and the competitors is essential in order to divide
the market into different segments which in turn is necessary to adjust services or products,
and price to the target customers. A market segment represents a group of customers, which
needs’ are similar, and differ from the needs of other customer in the market (Johnson et al.,
2011). Understanding customer needs, what customer’s value, and how to position to meet
those needs, is crucial for determining the firm’s strategic capabilities.
Market segments are also important to raise awareness among managers regarding a number
of important factors. For instance, it is easier to identify the relative market share, which in
turn is an important consideration (Johnson et al., 2011). A company that have built up the
most competence in servicing a specific market segment should have lower cost, relative to
the service they provide, than the competitors. Also, they have had the opportunity to build a
relationship with the stakeholders, which are difficult for competitors to break down. This
means that this firm should have an advantage over it rivals.
However, many managers fail to go further than the division into segments (Johnson et al.,
2011). The crucial part is not the division itself but rather to understand how the needs differ
among the segments. This is the fundamental part of developing strategic capabilities. So by
finding the critical success factors for a specific segment, the firm becomes aware of which
9
services they should focus on, thus in which services it is important to outperform the
competitors.
The environment affects the firm’s sales, and provides the organisation with opportunities and
threats. However, the environment is not decisive for the company’s performance (Johnson et
al., 2011). Instead, the thing that distinguishes companies from each other, and determines
performance, is their strategic capabilities. For instance, Saab and Volkswagen compete in the
same environment, but Volkswagen is superior in performance. Hence, the difference lies in
the capabilities rather than in the environment.
2.2.2 Strategy
In the past decades, it was firmly believed that the only way for firms to achieve competitive
advantage was to be efficient (Porter, 1996). This meant that firm’s had to be very flexible in
order to be able to respond quickly to any changes in the market. It also meant that firms often
outsourced activities to large extent and that they continuously had to compare themselves to
competitors via benchmarking to ensure best practice. Positioning was neglected because it
was believed that competitors could easily duplicate market position and thereby competitive
advantage. Hence, competitive advantage was considered temporary.
The reason for this development was the structural changes in the market, where markets
became more global, and an increasingly higher rate of technological change. According to
Porter (1996), this development has not benefited anyone and not generated sustainable
profitability, but has rather generated an extreme competition in the market, so called hyper
competition. Porter (1996) further argues that the problem with this development is the
neglecting of strategy. This development has created a high operational effectiveness, which
is indeed necessary, but not a basis of competitive advantage. In order to be able to
outperform competitors, the company must establish a competitive advantage they can
preserve. Hence, they must provide a greater value to customers, or deliver a similar value to
lower cost than the competitors. The ability to do so derives from the myriad of activities that
takes place within the firm. Firms that are able to perform different activities than the rivals,
or perform the same activities in a different way and thereby deliver a higher value than the
competitors, are able to create competitive advantage. This is known as strategic positioning.
To be more specific, strategic positioning attempts to accomplish competitive advantage by
distinguishing what is characteristic about a company. Operational effectiveness on the other
hand, is based on performing the same activities better than the competitors. For example,
cost is generated by performing certain activities, and if a firm can achieve higher efficiency
in these activities, the production cost per unit will decrease. Hence, in order to achieve
superior performance, both strategic positioning and operational effectiveness is required.
The problems with the development the last decades are that operational effectiveness is
easily duplicated (Porter, 1996). For example, the more benchmarking firms do, the more they
tend to look alike. Also, the more activities they outsource to specialists, the more similar
these activities become. Likewise, the more two firms compete by increasing efficiency in the
same activities, and continuously lowering the price, all gains are acquired by the customers.
So in order to achieve a sustained competitive advantage the company need to deliver
something unique to its customers. Strategic positioning means deliberately choosing a set of
activities that differ from the competitors and that deliver a unique value. Hence, the essence
of strategy lies in the activities. This means, in order to create a unique value, it is essential to
choose different activities than the rivals. However, it is not as simple as just choosing
different activities, the firm need to ensure that this strategy is not easily duplicated. An
10
advantage is not sustainable unless it exists trade-offs. The reason is that, in a world without
trade-offs, competitors can broaden their current activities and copy a successful position
while maintaining their current position. This is known as straddling. However, this is very
difficult to achieve because of inconsistencies in image, for instance, a low-cost brand cannot
copy a high-end strategy and start to market exclusive products. The reason is that they lack
credibility to deliver high-quality products, and thereby, they will not attract customers with
high purchasing power. The other way around, a high-quality brand would undermine their
reputation if they would offer low-priced alternatives. Moreover, trade-offs can ascend from
the activities themselves. For example, different positions may require different equipment,
skills, management systems, organizational structure, and etcetera. Hence, trade-offs arise
when activities are unable to coexist. Thereby, strategy means making trade-offs in competing
and a major strategic decision is to determine what not to do.
While operational effectiveness is about achieving quality in one specific activity, strategy is
about combining activities and fitting different activities together (Porter, 1996). This is
important because individual activities affect each other. The most important fit is strategyspecific. This means that the fit between activities enhance the uniqueness of the firm’s
strategic position and increases the trade-offs. Porter exemplifies this by using Southwest
Airlines. This company offers low-cost air travel within North America. The low cost
advantage over the competitors is achieved by flying only from midsize cities to subordinate
airports in large cities and back. Further, the company do not offer assigned seats, meals or
baggage check-in. This enable a very short turn-around time, which in turn enables fewer
aircrafts to achieve more frequent departures and fly longer hours. Further, the company only
uses one type of airplane for their entire fleet which enhance efficiency of maintenance.
Hence, Southwest Airlines’ strategic position is strengthen by the company’s activities. The
higher the consistency between the way activities are performed and the firm’s strategy, the
stronger competitive advantage. It also makes it easier to communicate the strategy to
customers, shareholders and employees. This example can be applied on all industries, the
only difference is that the activities differ. For instance, in the insurance sector, a low-cost
strategy would have based upon a slim service organisation, a large part of the effort would be
transferred to the customers, no additional services would be included in the offer, and only
delivering standard solutions with little or low flexibility.
Fit is essential for sustained competitive advantage because it is much harder for a competitor
to match a whole system of linked activities rather than imitating an individual activity, such
as specific production technology or a set of product features (Porter, 1996). The success of a
strategic position depends on the ability to do many things well, not only a few, but also the
ability to fit them together. Hence, a position built on a system of activities is much more
sustainable than those built on a few core competences. In this case, a competitor would gain
little from trying to copy a single or a few activities. For instance, airlines that have tried to
duplicate Southwest Airlines’ low-cost concept, but have chosen to maintain some of the
services that Southwest do not offer, have failed completely. By not adjusting activities to the
strategic position, competitors have failed to achieve short turn-around times and standardized
maintenance, and not been able to achieve low operating expenses. Thereby they have not
been able to match Southwest’s low ticket price, and therefore not attracted customers.
The task of determining a strategy is to large extent a managerial question (Porter, 1996). The
most important assignment is to clearly define a position for the company, and adapt activities
and fit them together to enhance that position. It is also crucial to be able to communicate this
strategy to all stakeholders.
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Generic competitive strategies
According to Porter (1985), positioning determines the firm’s profitability compared to the
rest of the industry. There exist two fundamental types of competitive advantage; low cost or
differentiation. Further, depending on the scope of the activities, i.e. whether to approach a
broad range of customers or focus on a few, this generates three generic strategies; Cost
leadership, differentiation, and focus.
First, the cost leadership strategy means that a company strives to become the low cost
producer within the industry (Porter, 1985). For example, this can be achieved by economies
of scale, copyrighted technology, or there exclusive access to low cost materials or labour. If a
firm can achieve and sustain a cost leadership, lower production costs and low overhead costs,
this will lead to higher profits margins than the competitors. Or if the product is not perceived
as equivalent to the competitors’, the firm can reduce their sales price in order to enhance
sales.
Secondly, the differentiation strategy means that the firm seeks to become unique within the
industry (Porter, 1985). The firm selects one or more characteristics that are valuable for
many buyers, and focus on these. The differentiation can be achieved by the product itself, the
marketing approach, the delivery system, etc. In order to succeed with a differentiation
strategy, the firm must focus on activities that enable the firm to charge a price premium that
exceeds the additional cost of being unique. The differentiation strategy requires the firm to
choose activities that makes it truly unique if it is to receive a premium price.
Finally, the third strategy is focus. The focus strategy means that the firm focus their efforts
on a narrow range of customers within an industry. Further, the focus strategy can be
implemented in two ways; cost focus or differentiation focus. A cost focus strategy means that
a firm seeks to achieve a cost advantage within the target segment. A differentiation focus
means that the firm seeks to a find position within its target segment.
2.2.3 Resource-based theory of competitive advantage
Grant (1991) argue that foundation for strategy formulation is the firm’s resources. The
reason, according to Grant, is that the firm’s environment is too unstable. If the preferences of
the customers are volatile, a strategy based on their current needs is not a very long-term
solution. The firm’s own resources are much more stable, hence, formulating a strategy based
on the firm’s capabilities provides a more resilient foundation to build a strategy on.
The firm’s ability to earn profits from their strategy depends both on the attractiveness of the
industry and the constitution of competitive advantage over the firm’s rivals (Grant, 1991).
Grant however, argue that finding a competitive advantage is the decisive factor for
differences between firms rather than the industry they operate in. Regardless if the
competitive advantage is based on low costs or differentiation, the foundation of competitive
advantage is the firm’s resources. For instance, a low cost advantage is based upon resources
such as superior process technology or access to low-wage workers. Further, a differentiation
advantage is built upon such factors as brand reputation or an extensive service and sales
network.
Resources are defined as inputs used in process of production (Grant, 1991). It could be
physical resources, financial resources, human resources, reputation, or organizational
resources. On their own, only a limited number of them are productive, and in order for all to
be productive, they need to be coordinated and combined. Combined and coordinated
12
resources are the source of the firm’s capabilities. In turn, capabilities are the source of
competitive advantage. In order to enable returns from the firm’s resources, it is crucial to be
aware of the relation between resources and organizational capabilities. This is to the major
part a managerial issue and arises from the ability to identify and combine resources into
lucrative processes.
Capabilities can be created in different ways (Grant, 1991). However, the process is usually
complex in the sense that it is not only a matter of assembling resources but rather
coordination between resources and people. A capability is, in principle, a combination of
interacting routines. Each routine is based upon sequences of coordinated actions performed
by individuals in the daily operations. In turn, the firm’s resources are decisive in the
development of routines since they constrain what can be done within the organisation. Since
routines are based upon activities in the daily operations, they involve a large part of implicit
knowledge. Accordingly, this means that many of the firm’s capabilities are not articulated.
One significant issue when assessing firm capabilities is to maintain objectivity (Grant, 1991).
It has been proven that many organizations have failed in delivering according to expectations
because of overly-optimistic hopes of the future and relying on past glories. Many failed
companies believed themselves to be superior in customer service and products, and were
thereby fooled into a false sense of security. Grant states the importance of comparing
capabilities relative to those of the competitors and thereby focusing on the relative strengths.
The sustainability and the capability to earn money from the firm’s competitive advantage
depend to a large extent on the characteristics of the firm’s resources and capabilities (Grant,
1991). In order for the competitive advantage to be sustainable, the resources behind it need
to be durable, non-transparent, non-transferable and non- replicable. In essence, the extent to
which the firm can protect the resource from imitation by rivals, determines the sustainability
of the competitive advantage. The competitive advantages that fulfil these criteria should then
be the foundation which the firm build its strategy upon. An accurate strategy makes the most
efficient use of these resources and capabilities. Defining a strategy around these resources
may imply that the firm makes trade-offs by only focusing on activities where they have a
clear competitive advantage. It is also crucial for the management to realize that the identified
sustainable advantages do not last forever. They require constant development in the same
pace as the market conditions develop.
The VRIN-framework
In similar way as Grant (1991), Barney (1991) has developed a framework for assessing the
sustainability of a particular resource. According to Barney, resources must be valuable, rare,
imperfectly imitable and non-substitutable in order for them to enable a sustainable
competitive advantage.
Valuable resources: The value of resources is the imperative factor when determining
whether a resource is the basis of competitive advantage. A firm attribute may very well have
the other characteristics that qualify it as the foundation of a competitive advantage, but
unless it is valuable, it can never constitute a competitive advantage. For an attribute to
become valuable, it must seize opportunities or eradicate threats in the firm’s environment.
Rare resources: Valuable resources that are controlled by many of the firm’s competitors
cannot be the source of competitive advantage. The reason is that if a valuable resource is
possessed by many different firms, it can be exploited in similar ways by many actors. In this
13
case, none of the firm can achieve competitive advantage over one another. Hence, a firm can
only achieve competitive advantage if the same strategy is not simultaneously implemented
by other firms.
Imperfectly imitable resources: A rare and valuable resource can only be the source of a
sustained competitive advantage if the resource cannot be imitated by the firm’s competitors.
A resource can only be imperfectly imitable if the resource has a unique historical connection
to the firm or if the link between the resource and the competitive advantage is not
understood. It can also be imperfectly imitable if the resource is socially complex, which
means that it is beyond the firm’s ability to influence or systematically manage.
Non-substitutability: Finally, a resource can only be the source of sustained advantage if it
does not exist any strategically equivalent valuable resources. Also, it cannot be possible for a
competing firm to implement a strategy that targets the same strategic goal.
2.2.4 Diagnosing strategic capabilities
Value chain
To ensure competitive advantage, the firm must be able to deliver value to customers (Porter,
1985). In order to do so, management must be aware of which activities that is of particular
importance to achieve this value. The value chain is described as the activities within an
organization that, combined, create a service or a product. There exist different types of
activities within the value chain, see figure 2. Porter (1985) divides these activities into two
main categories; Primary activities and support activities. Primary activities are directly
connected to the delivery of the service or product while the support activities are vital to
improve the efficiency of the primary activities. For instance, primary activities such as
operations transform input into the final service or product, and marketing and sales helps
making customers aware of the firms’ service or product. Marketing and sales can for
example consist of advertising, sales administration, and selling. Service may consist of
activities that maintain or enhance the value of the service or product. Supporting activities
can, for instance, be human resources management, which transcends all primary activities
and include recruiting, training, managing, and rewarding employees. Firm infrastructure
might consist of quality control, formal systems of planning, structures and routines, and
finance.
Figure 2. The generic value chain (Porter, 1985 pp. 37).
14
The value chain can be helpful in order to understand and analyse the firm’s strategic position
(Porter, 1985). For example, by mapping the cost and value of the firm’s activities,
management can focus on those activities that contribute the most value relative to the cost.
Firstly, it is important to identify sets of activities, and which routines and capabilities that
compose these activities, within the organization (Johnson et al, 2011). Secondly, one must
identify which activities which are most important to achieve a competitive advantage over
the firm’s competitors. For example, it is likely that a branded electronics company consider
marketing, research and development as critically important activities. After this, the firm
must decide if the cost of these activities correspond to what they contribute. The importance
of the activities must be put in relation to the value and cost of the competitors’ activities.
Finally, it is important to investigate which activities that are linked to each other and which
are self-standing. After analysing the firm’s activities, it is possible for management to
determine where to focus resources and where it is possible to cut costs without risking to
reduce the customer value. Thereby, it is possible to question if the cost structure related to
the firm’s strategy is realistic.
The value chain analysis can also be used to determine how a competitive advantage can be
sustained by using the VRIN criteria (Johnson et al., 2011). For example, it might be possible
that valuable resources can be deployed further or the firm may be able to determine which
resources in the value chain those are not vulnerable to substitution.
Activity systems
Similar to the value chain analysis, mapping activity systems is a way of assessing how the
firm’s capabilities are linked together into different activities (Johnson et al., 2011). By
mapping the activity systems, an analysis of how the firm’s resources are deployed
throughout the organization can be undertaken. The different activities represented in this
map can be seen as a part of a value chain. However, the activity systems map provides a
more profound insight of how different activities are linked together and the fit between
different activities.
2.2.5 Agricultural risk
Risk is a vital aspect to take into account in agriculture. Risk is defined as imperfect
knowledge where the probability of the possible outcome is known (Hardaker et al., 1998).
Uncertainty however, exists when these probabilities are unknown. Risk and uncertainty has
always been an important question in the daily operations on farm level. However, the
question is becoming increasingly more important, mainly because of deregulations in the
agricultural commodity market. This has led to price liberalization, which in turn has led to
more farm-level exposure to competitive market forces that are less predictable. The
complexity of farm operations implies that farmers experience many different types of risks.
•
•
•
Production risk: “Production risk comes from the unpredictable nature of the weather
and uncertainty about the performance of crops or livestock…” (Hardaker et al.,
1998, pp. 6).
Price or market risk: “Prices of farm inputs and outputs are seldom known for certain
at the time that a farmer must make decision about how much of which inputs to use
or what and how much of various products to produce.” (Hardaker et al., 1998, pp.
6).
Institutional risk: “Changes in the rules that affect farm production can have farreaching implications for profitability.” (Hardaker et al., 1998, pp. 6).
15
•
Human or personal risk: “The people who operate the farm may themselves be a
source of risk for the profitability of the farm business.” (Hardaker et al., 1998, pp.
6).
The aggregate effect of the risks mentioned above is often referred to as business risk
(Hardaker et al., 1998). Other than business risk, it exist risks associated with how the firm is
financed. Financial risk occurs from the use of borrowed capital to finance the firm. This
means that a share of the profits must be reserved for paying interest rate on the debt. If the
firm is only financed by equity, no financial risk exists. However, if both debt and equity is
used, firms’ can benefit from financial leverage. To experience positive effects from financial
leverage, the firm is required to have a return of total capital that is higher than the interest
rate. If this occurs, the return on equity will be higher compared to if no debt were used,
because a larger turnaround can be financed. Nevertheless, there is a risk with debt financing,
i.e. negative leverage. In the case that the firm’s return on total capital is lower than the
interest rate, the return on equity will be lower compared to if no debt were used. In the worst
case, return on equity will be negative.
2.2.6 Managing risk at farm level
It is impossible to avoid risk all together but decisions at farm level can have substantial
impact on riskiness of the production. There are few general prescriptions of how to manage
risk but there are however some provisions that can be made. These will be explained in the
following part.
Collecting information
One important part of risk management is knowledge (Hardaker et al., 1998). Typically, if
knowledge is accumulated regarding an investment, the dispersion of possible outcomes is
reduced. For example, gaining knowledge of animal welfare before building a new stable will
likely make the farmer regard these aspects in the building process, and thereby risk of
problems in the production will be reduced.
Avoiding or reducing exposure to risk
Reducing risk at farm level can to some extent be easily reduced by following a number of
simple principles (Hardaker et al., 1998). The first principle is to postpone a decision until
more information about negative outcomes of the decision is obtained. The idea of the second
principle is to be cautious in implementing new approaches were the effects are unknown, i.e.
better safe than sorry. However, the third principle states that it might still be better to
implement a small change than to not doing anything. These principles can simply be viewed
as common sense.
Selecting less risky technologies
By choosing more stable production technologies, the variance of the profitability will
decrease over time (Hardaker et al., 1998). For example, intensive livestock production is
considered less risky than for instance extensive grain production, since the grain production
is more effected by climatic variability. Furthermore, investments in technology that reduce
the climatic variability can also be done; one example is investments in irrigation.
16
Diversification
The fundamental idea of diversification is to reduce risk by selecting a combination of
activities with low or negative correlation (Hardaker et al., 1998). The problem on farm level
though, is that most activities are positively correlating, which makes it difficult to reduce risk
by diversification.
Flexibility
Flexibility means the ability to adapt current production to environmental changes (Hardaker
et al., 1998). This means having assets that can be used in more than one type of production,
i.e. Asset flexibility. It also means producing products that can be used for more than one
purpose, i.e. Product flexibility. Another type of flexibility is market flexibility, where a
product can be sold in more than one market. A forth type of flexibility is cost flexibility,
which means keeping the fixed costs at a low level, with higher variable costs as a result.
Finally, time flexibility refers to the speed of which alterations in the current production can
be made. The length of the production cycle is crucial for determine how fast changes can be
carried out, hence, a short production cycle means more flexible production.
Insurance
Finally, insurance is a way of managing risk in the firm (Hardaker et al., 1998). By insuring
assets in the firm, farmers recede from a part of its income in order to protect themselves from
significant losses due to accidents. This will be explained more comprehensively in the
following chapter.
2.2.7 Insurance
The insurance principle is only applicable if it is possible to objectively compute probabilities
of a certain event on the basis of past experience (Haynes, 1969). The individual firm must
face high uncertainty about the event. By pooling the individual uncertainties, it is possible to
calculate the probabilities of this event for the mass. In other words, it is possible to transform
high uncertainty about individual probability into a high degree of certainty about pooled
probability. This is based upon the law of large numbers, which makes uncertainty of a
particular event move towards regularity within a mass. Under these circumstances, a
comprehensive insurance program is possible.
The concept of insurance cannot exist unless most people are risk adverse (Kaas, 2001). The
reason is that insurance can only exist if a large number of people are prepared to pay a
premium for having insurance that is higher than their expected claims. Hence, insurance is a
risk sharing device where insurance companies accept appropriate premiums from many
clients and thereby are able to pool their risk.
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3 Method
3.1 General approach
This study rests on a positivistic research approach and qualitative method, which is
motivated by the nature of the aim, and the research questions. The underlying factors of the
problem, for instance customers’ view on customer value, were unknown from the start. This
means that question had to be asked in a way so that the underlying factors could be
identified. In order to achieve this, qualitative method is superior to quantitative method
(Kvale, 1997).
The approach implies that the study emanates from a theoretical framework that is then used
to examine the empirics; herein a case study (Robson, 2002). A hermeneutic approach, on the
other hand, is inductive which means that it uses empirical data to form theories. In this study,
the positivistic approach is applied to be able to examine Länsförsäkringar’s strategic work
and the connection between Länsförsäkringar’s strategy and their customers in search of signs
of strategic drift. This approach demands extensive collection of secondary data before the
primary data is collected. Otherwise, there is a risk that the study is based on a theoretical
framework that is not suitable for investigating the specific problem. However, the results
from the study do not constitute a general solution that can be transferred on to other settings,
which is usually the case in a positivistic study.
The chosen topic has been thoroughly examined from several perspectives and a solid
foundation is provided by previous academics. There is no unique way of how to evaluate a
firm’s strategy. Porter (1996), Grant (1991), Johnson et al. (2011), and Barney (1991) all
focus on corporate strategic work from a resources perspective. Nwankwo (1995) and Kotler
(1999) however, state the importance of market orientation. Even so, the intention of all
studies previously mentioned is the same; become a successful company.
3.2 Literature review
The purpose of the literature review is to collect secondary data in order to receive
contemporary information of how similar research problems are approached. This is
necessary in order to be able to structure the interview questions about Länsförsäkringar’s
delivered services. The literature review is the process of systematically searching the
research and publications that has been conducted on a certain subject (Hart, 1998). The
material, both published and unpublished, is written from a particular perspective, with the
intention of fulfilling an aim or expressing the accumulated view on a certain topic. The
literature review is defined as an effective evaluation of these documents in order to provide a
framework for the following study. The literature used in this study is collected from
management and marketing journals, as well as text books on strategy and risk. Since the aim
of this thesis is to investigate whether or not Länsförsäkringar’s view on customer benefit
corresponds with the consumer’s view of this, the thesis is based upon two theoretical
frameworks. This results in a divergent data material in the literature review.
First phase
In the first phase of the literature review, text books on the topic of strategy and strategic drift
were studied. From this material, we were able to find additional material in form of journals
and other text books. The collected material assisted us to formulate accurate search terms for
the second phase of the literature review. Since the thesis examines the problem from both
18
corporate and consumer perspective, the literature review has two different perspectives.
Table 1 and 2 shows the terms used in the search for literature.
Table 1. Search terms corporate perspective.
TX All Text
TX All Text
Strateg*
AND Competitive advantage*
Sustained competitive
advantage*
Customer orientation*
Market orientation*
Table 2. Search terms farmers perspective.
TX All Text
Managing risk*
Business risk*
Business insurance*
AND
AND
TX All Text
Service sector*
Service enterprise*
Service compan*
Insurance sector*
Insurance enterprise*
Insurance compan*
TX All Text
Agriculture*
Second phase
The findings from the first phase provided a foundation for the second phase in the literature
search. To ensure that the literature review covered all of the essential material, the data was
collected in a systematically way primarily from three databases; Web of knowledge, JStore
and Google scholar. The search generated about 100 relevant articles from the viewpoint of
the corporate perspective and about 50 relevant articles from the viewpoint of the farmer’s
perspective. However, all these articles were not relevant for the chosen topic and therefore a
practical screening was carried out. The search was not limited to a certain time interval
because no relevant factors pointing towards using such an interval existed. Still, to ensure
ourselves that the thesis took into consideration the contemporary view of the problem, recent
articles were always reviewed.
Third phase
The final step was to review the reference lists of all articles found in the literature search.
The reason was to ensure ourselves that we did not miss out on any promising literature by
not using exactly the same search terms. This also included the reference lists of the literature
retrieved in the first phase.
3.3 The empirical study
The empirical study is based on a qualitative approach. The reason is that the aim of the study
is to find a number of unknown factors that contribute significantly to the customer value of
services related to Länsförsäkringar’s offer. This means that the study must use open
questions, which in turn means that a quantitative study, e.g. a survey, is not a possible
approach. A quantitative approach requires awareness of which factors that determines the
perceived customer value. The qualitative approach is also superior to quantitative in terms of
the validity of the results. The reason is that it clearly reflects the respondents view, and it is
possible to discuss any obscurities. However, a quantitative method is superior to qualitative
in terms of reliable results. The reason is that it is possible to contact more respondents and
thereby provide a general opinion in a population.
19
Qualitative method is superior to quantitative when it comes to providing a deep knowledge
of a problem (Eliasson, 2010). Quantitative method is on the other hand better when it comes
to providing a more general perception within a population. The problem requires a deeper
and more profound understanding of what contributes to customer satisfaction, and therefore
interviews where preferred.
3.3.1 Choice of company
The target of this case study is Länsförsäkringar Uppsala. The company initiated this study by
purposing a framework of question that they wanted to investigate. Since the company only
operates in the district of Uppsala, all primary data were collected in this area. This study will
only address areas that lie within the operations of Länsförsäkringar Uppsala. Within this
relatively extensive organisation, the thesis will focus on the agricultural insurance
department. Agricultural insurance has a unique position within Länsförsäkringar Uppsala,
and in retrospective, this has been an important reason for the company’s success. The thesis
will also examine the effects of Länsförsäkringar’s banking services as an addition to the
insurance operations. Because of the developments in the agricultural market and the
increasing competition, the management stated the mentioned issues as a potential threat to
the company’s operations within this specific sector. After several meetings, we settled the
aim and the research question in cooperation with the head of the agricultural insurance
department and the head of banking operations.
The study do not take into account the strategies and offers of any competitor. The analysis
will only process the respondent’s perceived competition. The reason is that the study aims to
identify which factors that are important for the perceived customer value. Hence, the actual
offer from the competitors is not as important as how their offer is perceived by the
customers.
3.3.2 Case study
“Case study is a strategy for doing research which involves an empirical investigation of a
particular contemporary phenomenon within its real life context using multiple sources of
evidence.” (Robson, 2002, pp. 178). The empirical data is based on a case study of
Länsförsäkringar Uppsala. The purpose of this study is to collect data in order to identify
which activities that add value to the customers at Länsförsäkringar Uppsala. To determine
which activities that are related to the sale process, the whole process must be studied to
provide a holistic perspective. This is known as activity mapping (Johnson et al., 2011).
Interviews with the staff where carried out in order to identify the sales activities. Activity
mapping is a way of identifying different activities and how they are linked together within
the organization, so called strategic capabilities. Strategic capabilities derive from the linkages
between different resources.
After the activities where identified, we assessed how they contribute perceived customer
benefit. This was carried out by interviewing a number of current and former customers. The
motive for the choice of interviews as method of collecting data was to be able to understand
the customer’s situation. In order to compare this with Länsförsäkringar Uppsala’s view on
customer orientation, flexibility and clarity was essential.
3.3.3 Interviews
Before the interviews were carried out, secondary data was studied to ensure the quality and
the validity of the material from the interviews. To ensure a good structure of the interviews,
20
an interview guide was constructed (Kvale, 1997). The interview guide was semi-structured
and divided into research question and interview questions. The research questions are
general questions that the interviews seek to answer, and the interview questions are
underlying question with the intention to answer the research questions. The interview
questions are used during the interview. It is vital that the interview questions are clear and
precise in order to avoid confusion during the interview. It is also important to avoid an
academic jargon. Furthermore, if the questions are too precise, there is a risk that the
conversation will struggle (Andersson, 2001).
In order to be able to formulate the research questions, the interview methodology was
studied together with all of Länsförsäkringar’s strategic documents. This was then used to
identify eight factors that convert Länsförsäkringar’s strategy to an offer. These factors are;
products, synergies, perceived competition, the sales process, employees, structure and
organisation, social and environmental responsibility, and brand. These factors are what the
customers have to consider in their choice of insurance company and financial partner. Each
factor has a number of interview questions that are actually used in the interview in order to
investigate the importance of the factor. All questions are to be found in appendix 1 and 2.
It is of great importance that the interviewee is well aware of the purpose of the interview,
what the aim of the study is, the reason they have been chosen and how the data will be used
(Andersson, 2001). If these criteria’s are not fulfilled, this can lead to speculations and
uncertainty amongst the interviewees. Other relevant information to the interviewee is
estimated time of the interview so that the respondent does not get anxious. In order to ensure
that none of the mentioned problems occurred, a letter with information about the timeconsumption and purpose of the interview was sent out.
Furthermore, it is important that the interview is executed in an environment that makes the
interviewee does not get bothered (Ekholm & Fransson, 1987). Therefore all interviews were
carried out in the workplace of each respondent. In order to enhance the conversation, it is
important that the interview starts with more casual conversation off topic. It is also important
that the purpose of the interview once again is clarified. During the actual interview, it is
essential to listen very carefully and be respectful towards the respondent.
The number of interviews is decided by available time and resources but also the purpose of
the study. Also, the number of interviews depends on level of saturation from each additional
interview (Kvale, 1997). This means that the level of new information contributed by an
additional interview is bound to decrease as the number of interviews increase. In the data
collection, this was decisive for the number of interviews carried out in each category.
All of the interviews were recorded to ensure that no information where missed. The essential
material from each interview was then typed down in a summary of the interview. All
summaries where then used as the foundation for the empirical data. The empirical data was
divided into two categories; one with data from interviews with employees at
Länsförsäkringar and one with data from the customers. The data was also categorized under
each factor.
All interviews were carried out between 2012-03-08 and 2012-04-23.
21
3.3.4 Choice of respondents
The purpose of the interviews is to provide a profound knowledge of the problem in question.
Our collection of primary data started at Länsförsäkringar and the purpose was to gain
knowledge of how their offer is constructed but also what they believe to be the foundation of
Länsförsäkringar’s competitive advantage. Three interviews were carried out at the company.
We intended to use both operational and managerial sources in order cover the whole chain
from strategic implementation to actual delivery of the product. We therefore interviewed one
insurance salesman, one handling officer at the agricultural bank, and the sales manager of the
agricultural insurance department.
In order to investigate how well Länsförsäkringar’s strategy corresponds to customer needs,
ten interviews were carried out at customer level. To ensure that the thesis covered all
different preferences among the customers, three groups of customers where identified;
Large-scale farm enterprises, non-active farm owners, and customers that have left
Länsförsäkringar. This deviation disregard from Länsförsäkringar’s market segmentation, i.e.
the large-scale farm enterprises, the part-time enterprises, and the non-active farm owners.
The reason that the part-time enterprises are excluded from this study is that their needs, in
terms of customer value, are very similar to the large-scale farm enterprises. This is motivated
by the fact the part-time enterprises’ operations are the same as the operations at a large-scale
farm enterprise, only in smaller scale. All respondents were provided from Länsförsäkringar’s
customer-lists by the employees.
To start with, interviews were carried out at large-scale farm enterprises. Among these, at
least one had to be certified according to Säker Gård and at least one had to use
Länsförsäkringar as their provider of banking services. Further, non-active farm owners were
interviewed, of these, at least one had to use Länsförsäkringar as their provider of banking
services. Finally, customers that no longer use Länsförsäkringar as their financial partner
where interviewed. In the final group, at least one large-scale farm enterprise. Saturation
within each group where achieved after five interviews in the first group, three interviews in
the second group and two interviews in the third group. The reason why the first group
needed more interviews to achieve saturation was that this group is perceived as much more
heterogeneous.
22
4 The empirical study
This chapter contains the primary data from all interviews, both at corporate and customer
level.
4.1 Länsförsäkringar Uppsala
The following part contains the primary data collected from the interviews at
Länsförsäkringar.
Respondent 1 is a salesman for agricultural insurance products.
Respondent 2 is banking advisor at the agricultural bank department.
Respondent 3 is managing the agricultural insurance department.
All data has been combined into one summation of each factor. The questions are to be found
in appendix 1.
4.1.1 Products
In 2009 Länsförsäkringar carried out an adaptation of the terms for agricultural insurance. The
motive was to adapt the supply of products to the structural changes within this particular
market. The process was named MIL, for modernisation towards the agriculture sector.
Before MIL, Länsförsäkringar had only one product as the basis to insure agricultural
enterprises. Respondent 1 states “This product was suited for a structure the agricultural
sector had left in the 1980’s”. Up until now, the sector has since undergone a massive change
and because of this, the enterprises have become more and more heterogeneous, and the old
solution has become obsolete. In the MIL-process, Länsförsäkringar developed two products
to better be able to cope with the heterogeneity. The first product is developed for the needs of
non-active farm owners, and is very similar to a regular household insurance, but with some
additions for farm buildings etcetera. Respondent 1 states that “I think that this product is very
standardized and rather simple in its constitution, and therefore well suited for this segment”.
The second product is developed for active agricultural enterprises and is more similar to
other owner-operated enterprise insurance, in other industries. This product is much more
flexible, where additional branches can be included in the agricultural insurance. This opens
up for more complex and comprehensive insurance solution. The MIL-process also clarified
which activities that could be included in the agricultural enterprise insurance and which
should be included in the terms for other enterprises.
The MIL-process is a result of the customer’s new demand generated by the structural
changes in the agricultural market. Länsförsäkringar has very much been forced into this
modernisation-process, as a consequence of being the market leader. All interviewees believe
that the current solution is well-suited for modern agricultural enterprises.
4.1.2 Market strategies
The market strategy clearly states the importance of finding agricultural enterprises in change.
This means enterprises that are developing new branches, extending current operations or
changing ownership due to generational change. How this is achieved in the daily operations
is, however, not stated. Respondent 3 puts this as “I do not know how we are to find the
enterprises undergoing change, we are struggling with that right now. I do not have an answer
23
but we have raised the question”. The process of change at farm level does not naturally
involve a contact with Länsförsäkringar, since insurance is one of the last steps in this
process. Hence, Länsförsäkringar is no natural partner when it comes to planning a change.
Respondent 3 believes that “This is problematic because it has proven more likely that
customers undergoing change are more open for financing suggestions and additional sales”.
Länsförsäkringar is currently focusing resources towards this issue to be able to find a
solution. However, the position as market dominant makes it possible to find a large
proportion of the changes among the client, but not at an early stage. The problem is therefore
to boost sales, especially the banking services, through these changes.
The most obvious solution to this problem is to have the customers approaching
Länsförsäkringar instead of Länsförsäkringar finding the enterprises in change. According to
several of the interviewees, this is achieved by being visible in the market and establishing
Länsförsäkringar as a natural partner in the process of change. Respondent 1 points out a
competitor as a good example “Swedbank has developed simple solutions for many of these
processes, where the solution is presented as a package-deal including all services required to
handle a certain issue, for instance generational change”. The same interviewee also states
that Länsförsäkringar would have to complement competences from cooperation with external
firms to be able to tailor these solutions. This would for example include services related to
law practice.
A very important part of the market strategy is how to process each segment. During one of
the interviews it emerged that the strategy for how to do this must be clarified. Today, all
active agricultural enterprises receives a personal contact by a salesman at least every second
year. Länsförsäkringar has a clearly stated strategy towards this segment and this strategy
arises from a willingness to have the best competence in the market, within this field.
However, the non-active segment is processed by the local representatives and the part-time
enterprises do not receive any active processing at all. Respondent 1 states that “The part-time
segment falls through the cracks, and I think they will need more attention in the future”.
However, the same respondent believes that this segment will decrease in size in the future.
The opinion among the interviewees is that processing of the non-active segment is too costly
and ineffective, and that a restructure of the local representative organisation is required.
Furthermore, the part-time enterprises are neglected from a strategic point of view.
Respondent 3 states that “We need to develop new and clearer strategies of how to process the
segments“. Other local companies within Länsförsäkringar’s organization have solved this
issue in different ways. For example, some companies have placed the non-active farm
owners within the private segment, which means that they receive processing from private
salesmen. Other companies have disregarded from processing of the non-active farm owners,
and finally some local companies have a franchise-contract with the local representatives that
in turn are responsible for the processing.
Länsförsäkringar has a unique opportunity for processing the agricultural segment via
proactive claim activities. Respondent 3 put this as “In this case, Länsförsäkringar enters the
process of change at an earlier stage which makes it easier to discuss financing solutions”.
The view of how this opportunity is gathered up is diverging among the interviewees. One of
the respondents, who are employed as a banking officer, seems to think that this process is
going very well, and a lot of sales-opportunities are created via this channel. One of the
insurance salesmen thinks that there is still a lot to do and that success depends on broadening
the competences among the employees. Still, all believe that the proactive claim activities are
a great opportunity to become a partner at an earlier stage of a farm’s changing process.
24
A new tool for processing clients has emerged through the use of internet. Recently, a
solution that has been used towards other small-scale enterprises has been introduced to the
agricultural segment. Via this tool, the processing is done electronically, and the basic idea is
that a simple check-up, usually performed by a salesman, is now carried out by the customers
themselves via internet in order to identify any new need for insurance. This is believed to be
an efficient complement to the usual meetings.
4.1.3 Synergies
All of the respondents believe that one of Länsförsäkringar’s competitive advantages is that
they can provide an overall financial solution under one roof. Even though a lot of resources
are focused on emphasizing this, all interviewees believe that a lot more could be done,
especially in-house. One important step in this process is joint customer meetings between
bank and insurance. Respondent 2 believes that this is imperative not only to increase
customer awareness but also to increase competence about the other area among the
employees. Joint customer meetings has been introduced in the goals for 2012 and effects of
this strategy has already been noticed. In the normal type of customer meetings, i.e. when
primarily only insurance matters are discussed, the salesman needs to be able to assess
whether or not a customer qualifies for the offer but also if they are responsive. Again, this
requires a higher competence.
To ensure that customers benefit from having only one partner for their financial services,
respondent 3 believes that Länsförsäkringar needs to be efficient in every customer meeting.
Respondent 3 states “This is important so that the customer perceives a clear, non-economic
value of having Länsförsäkringar as their partner”. Yet again, all interviewees think that more
could be done to achieve this. Whether or not this is achieved today, depends very much on
the individual salesman. Therefore, respondent 2 identifies the need for a framework to
implement this among all employees.
Another important issue is to ensure that Länsförsäkringar’s overall solution is also beneficial
from an economic perspective. In the current configuration, customers receive discount on the
private insurance if they adopt the helkund-offer. The general opinion is that the economic
discount is not sufficient for large-scale farm enterprises. For the non-active farm enterprises,
where paid premiums are usually lower, the discount is perceived as sufficient. Some
suggestions are made for how to enhance the economic benefit for active enterprises, for
instance a discount on mortgage interests, excess reduction or a small discount on the
agricultural enterprise insurance. However, the head of agricultural insurance argue that there
is no room for additional discounts on the insurance. He also argues that the current discount
affects the customer’s private economy and is thereby worth more than additional discount for
the enterprise.
4.1.4 Perceived competition
The general consensus among the respondents is that the competitors’ product offer is rather
similar to Länsförsäkringar’s. However, they all believe that Länsförsäkringar provides a lot
better service, foremost trough the local attachment and good knowledge of agriculture. Also,
Länsförsäkringar is the only company in this market that provides proactive claim activities.
Respondent 3 believes that the competitors almost exclusively compete with price.
Respondent 1 tells about how some competitors aim to provide an overall solution by
establishing cooperation between banks and insurance companies. “It exists a reversed
25
relationship compared to Länsförsäkringar’s case” according to respondent 1. Thus, banks
with a high market share such as Swedbank and Landshypotek use their stock of clients to sell
insurance via their partner. In this case, it is very easy for customers to receive and compare
the competitors’ offer to Länsförsäkringar’s. Since the other companies usually compete with
price it is a challenge for Länsförsäkringar to motivate the often higher price.
It has also occurred that competitors take advantage of the services that Länsförsäkringar
provides. For instance, competitors have made offers to customers that have recently
undergone the certification process of Säker gård, according to respondent 1. This is
problematic because the process requires a lot of time and resources from Länsförsäkringar,
which in this case is not rewarded by a sustained relation.
4.1.5 The sales process
The sales process consists of four different types of meetings; Customer meeting, Telephone
meeting, Internet meetings and Proactive claim meeting.
Customer meetings
Respondent 1 believes that insurance is a complicated product and most customers are not
very familiar with the terms and conditions of their insurance. Respondent 1 also states that
“The customer meeting is a great opportunity to meet the customer face to face in order to
provide an overview of the products in question”. According to all respondents, this is one of
the key aspects in order to build trust between the client and the company. In the personal
meeting, as well as all the other types of meetings, all respondents believe that competence is
crucial. “The agricultural segment is unique in the sense that there is a tendency that the
clients require that the employees are very familiar with conditions and terms of the particular
sector, which is not the case in most other sectors.” according to respondent 1.
Telephone meetings
The telephone meeting is an important complement to the personal meeting. All of the
interviewees believe that the most important feature of this type of meeting is for the
customer to get in contact with the company. Hence, it is important to be available so that the
customer is noticed rather than actually solving the problem instantly.
The telephone meeting can also be used as a channel for the salesmen to maintain customer
relations. This channel is far less time-consuming than actually visiting every farmer and
Länsförsäkringar are trying to direct more of the customer relations work towards this
channel. The premises for the channel have improved, mainly because of the introduction of
new technology. For instance, respondent 3 argues that “The use of cell phones has made it a
lot easier to get in touch with customer today, than it was fifteen years ago”.
Internet
Internet is currently not used as a channel for direct sales but rather a source of information
for how to solve a problem or where to turn with questions. According to all respondents,
internet can potentially be used for direct sales of some products in the future. In this case, it
is believed to be important that all information is presented in a simple and clear way. Also,
this channel can be used in processing of customers.
26
Proactive claim activities
Proactive claim activities are considered a service rather than a channel for sales by
respondents 1 and 2. The purpose of this channel is to assist the clients in factual questions.
Further, it is believed to be an opportunity for both building trust and increasing sales.
4.1.6 The employees
All respondents perceive that employees have a lot of experience and good knowledge of the
agricultural market. Furthermore, the local attachment is believed to make the employees well
acquainted with the clients and their situation.
As the companies, and thereby the insurance solutions become more complex, it gets harder
for the employees to be a specialist in more than one area, according to the respondents.
Instead, the employees should have a broad knowledge of all services that Länsförsäkringar
provides. This is perceived as important in order to seize sales opportunities and to know
when to ask for assistance from other in-house specialists.
Länsförsäkringar’s market strategy celebrates the success of the implementation of customer
orientation. However, the interviewees unite in the belief that there is still a lot to do, and that
the product focus is still too distinct. Although, the interviewees think that they have started to
see a basis for increased customer orientation. This means that strategies and frameworks
increasingly guide employees towards seeing the customers’ needs as a whole, instead of
them only focusing on their own area of expertise. In order to keep going in the right
direction, the respondents believe that it is vital to broaden the knowledge among the
employees as well as increasing the awareness of customer needs.
4.1.7 The local representative organisation
The local representative sales organisation does not work satisfactory. All respondents think
that the organisation is in strong need of a modernisation and potentiation. The problem is
believed to be the terms of employment and thereby lack of cooperation between the company
and the representatives. “This leads to lack of control of the representatives and absence of
implementation of strategies which makes it impossible for the representatives to keep up
with current products and systems” according to respondent 1.
However, the local representatives are perceived to be an important part of Länsförsäkringar’s
history. They are also perceived as a crucial contribution to the local attachment, and thereby
part of Länsförsäkringar’s competitive advantage. All interviewees argue that there is high
potential in this organisational structure. Respondent 2 believes that the local representatives
are actually delivering sales opportunities for the bank. Also, respondent 1 and 3 both states
that the local representatives are more efficient than the number of salesmen Länsförsäkringar
could hire for the same cost.
4.1.8 Social and environmental responsibility
Respondent 3 explains that Länsförsäkringar complies with a number of policies and are
certified according to environmental standards. None of the employees believes that this have
had any effect on sales, or affected the customer’s choice of insurance company. However,
they all believe that this is necessary to maintain credibility.
4.1.9 Why customers choose Länsförsäkringar
In the final question in each interview, the employees were asked to point out which factors
they believe determines which insurance company a customer will choose. All respondents
27
believe that trust is vital. Respondent 2 states that “The customers must feel confident that if
something happens, their insurance company will compensate them”. Further, simplicity and
availability is also believed to be important. The fact that Länsförsäkringar is owned by its
customers is not believed to be a determining factor. However, it is assumed a bonus that
there is no owner that is requiring dividends. In Länsförsäkringar’s case, all interviewees
believe that the brand clearly represents this. They also believe the brand signals good
knowledge of the agricultural market. The employees think that it is possible for
Länsförsäkringar to charge a higher price for its products as an effect of better service.
4.2 Customers
The following part contains the primary data collected from the interviews carried out at
customer level. All respondents belong to the agricultural segment. In table 3, a summary of
the respondents’ characteristics are to be found.
Table 3. Overview of the respondent characteristics.
Respondent
Currently customer at
Länsförsäkringar
Active
1
X
X
X
2
X
X
X
3
X
X
X
4
X
X
X
X
5
X
X
X
X
6
X
X
X
7
X
X
X
X
8
X
X
X
X
Non-active
Insurance
9
X
X
10
X
X
Bank
Respondent 1 runs a large scale farm enterprise. The respondent works as inspector at a
farming company that operates 1500 hectares of tillable land for crop production. The
company also runs an egg production plant. The respondent does not own the land himself but
is managing the company on behalf of the owner.
Respondent 2 runs a large scale farm enterprise. The respondent is responsible for the
production in a family owned company that operates large scale crop production on about 250
hectares of land, as well as beef production, forestry, and house rental business.
Respondent 3 runs a large scale farm enterprise. The respondent is responsible for the
production in a family owned company that operates large scale crop production on about 200
hectares of land, and is also shareholder in a large scale pig production company.
28
Respondent 4 runs a large scale farm enterprise and uses Länsförsäkringar as bank. The
respondent is responsible for the production in a family owned company that operates crop
production, beef production, forestry and house rental business. The respondent also works 75
% off farm.
Respondent 5 runs a large scale farm enterprise and uses Länsförsäkringar as bank. The
respondent is responsible for the production in the family owned company that operates crop
production on about 85 hectares of land.
Respondent 6 is a non-active farm owner. The respondent works 100 % off farm and lease
the land to an active farm enterprise.
Respondent 7 is a non-active farm owner and use Länsförsäkringar as bank. The respondent
is semi-retired and works 50 % off farm. The respondent lease the land to an active farm
enterprise.
Respondent 8 is a non-active agricultural farm owner and use Länsförsäkringar as bank. The
respondent works 100 % off farm and lease the land to an active farm enterprise.
Respondent 9 runs a large scale farm enterprise but does no longer use Länsförsäkringar as
insurance company. The respondent uses Dina Försäkringar since three years. The
respondent is responsible for the production in a family owned company that operates large
scale crop production on about 140 hectares of land, and forestry. The respondent also works
50 % off farm.
Respondent 10 runs a large scale farm enterprise but does no longer use Länsförsäkringar as
insurance company. The respondent uses Dina Försäkringar since about one and a half
years. The respondent is responsible for the production in a family owned company that
operates large scale crop production, forestry, and contracting. The respondent is also a
shareholder of a large scale pig production company.
All data from the interviews has been combined into one summation of each factor. The
questions are to be found in appendix 2.
4.2.1 Products
The perception among all interviewees, regardless of segment, is that Länsförsäkringar’s
portfolio of products is sufficiently extensive and well suited for modern agricultural
enterprises. None seem to believe that there are any gaps to fill or that Länsförsäkringar is not
adequately flexible. Almost all of the active large-scale farm enterprises receive an annual
meeting at the farm were all insurance-matters are discussed. However, respondent 4, 9 and
10, do/did not receive this type of meeting, and state that they are not very impressed by
Länsförsäkringar’s services. Furthermore, almost all interviewees think that the products
conform to the specification and perceive the claims process as smooth. However, respondent
4 does not agree with this view and says; “When an accident occurs, the premium feels
expensive”.
In the future, all respondents believe that customers will make comparable demands from
their insurance company. Although, many of them believe that the standards will be raised up,
mostly because the scale of production will increase among the farmers and the significance
29
of the cost of insurance will increase. Moreover, respondent 4 believes that when the nonactive segment grows larger, the customers will not demand as much full-value insurance as
in the past. The reason is that non-active farm owners do not use farm buildings for the same
purpose as intended when they were built, which in turn means that these customers are not
interested in replacing them with similar buildings in case of damage. Finally, all respondents
believe that a good knowledge of agriculture and the agricultural market among the
employees will continue to be very important. Respondent 3 states “It is of great importance
that the Länsförsäkringar’s employees have a profound knowledge of agriculture, not only in
the local companies but also at higher up in the company”. Finally, many respondents believe
that the competition in the insurance market will increase.
When comparing Länsförsäkringar’s products to those of the competitors, there are no
obvious differences to be found, according to respondents 9 and 10. However, the area of
insurance is complex and it is difficult to compare different alternatives and actors.
4.2.2 Synergies
All interviewees were aware of the fact that Länsförsäkringar provides both insurance and
banking services. This information had been received from both employees and via
marketing. However, it is clear that all the respondents who are currently using banking
services have approached Länsförsäkringar in search for an offer rather than the other way
around.
Only respondents 5 and 9 were able to appreciate the connection between bank and insurance.
The only advantage stressed by these respondents was the convenience of having all this
information on the same webpage and that this is easier to overlook. Those who actually use
both services have not perceived the connection between bank and insurance as obvious, and
respondent 5 states “It does not matter if they have all services under the same roof, you still
do not approach the same people for the different matters”. However, they do not demand that
the same person must be an expert in both areas, but many believe that there is a dividing wall
between the different departments and that the cooperation between departments must be
improved. Respondent 4 puts this as “I do not think that the bank people and insurance people
cooperate as much as they should. This is something that needs improvement if customers are
to draw any benefits of having only one company”. Respondent 4 further gives an example
where he was to receive a payment from Länsförsäkringar. Despite the fact that he has his
bank accounts at Länsförsäkringar, employees from the insurance department had to phone
him in order to get a hold of the account number instead of seeking this in-house, which was
perceived as very unsmooth by the customer. Most of the interviewees believe that offers
from different bank are rather similar and they are therefore unwilling to switch bank unless
they have been treated poorly by their current bank. Respondent 1 claims that “People in
Sweden divorce more often than they switch bank”.
The discounts connected to the helkund offer are perceived as sufficient among those who
receive it, however, respondent 2, 4 and 7 states that customers are always interested in more
discounts. Respondent 5 emphasizes that Länsförsäkringar is very good at pointing out the
different discounts which in turn makes the customer aware of them. Respondent 4 also states
that this makes you think twice before choosing another company. The respondents who are
not currently using Länsförsäkringar as their bank often points out a good relation to the
current bank.
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4.2.3 Perceived competition
The competition in the insurance market is perceived as low by the customers, and many of
the respondents argue that it is too low. Only respondent 7 mention that he has been actively
approached by one of the competing firms. This occurred in connection to a meeting at a bank
that had established cooperation with an insurance company. However, all interviewees
believe that the competition in the insurance market will increase in the future. Most
respondents also believe that the attitude among the farmers will be more business-like.
Respondent 3 thinks that tradition will play a less significant role and that quality and
praiseworthiness will play a more significant part. However, all interviewees perceive that the
complexity of the matter makes it very difficult to compare the different companies’ offers.
Also, all respondents’ state that one will never know what the compensation for claim would
have been if one would have chosen another company.
Länsförsäkringar is perceived as an expensive, but high-quality, alternative compared to the
other companies. All respondents that have altered insurance company did so because they
were unable to see the benefits connected to Länsförsäkringar’s higher premium. They also
perceive that they have received the same level of both service and knowledge as they did
from Länsförsäkringar. These respondents also state that they have cut their cost of insurance
significantly. Though, respondent 10 emphasizes that he would prefer to still use
Länsförsäkringar as his partner but the businessman in him could not motivate this. On the
other hand, respondent 4 and 6 states that they would gladly change insurance company, but
have not yet set to work. Also, respondent 4 has approached a competing firm, and state that
the cost would decrease more than the discount connected to the helkund offer.
Most of the respondents are content with Länsförsäkringar as their insurance company. These
respondents emphasize their good relation to Länsförsäkringar which has been developed
over many years. They also highlight the good service that Länsförsäkringar offer.
Respondent 3 did for a period of time use a competing firm as insurance company but altered
back to Länsförsäkringar since the competing firm could not deliver trustworthiness.
4.2.4 The sales process
The sales process consists of four different types of meetings; Customer meetings, Telephone
meetings, Internet meetings and Proactive claim meetings.
Customer meeting
All respondents, except respondent 8, argue that having a specific contact person whom they
can always approach, regardless of the matter, is essential. For example, respondent 2 thinks
“It is of great importance that I have one person who I feel comfortable in contacting,
regardless of what my problem is so that he or she can guide my through”. The important part
is not to be able to answer all questions but rather to have someone within the company who
can guide you through to the right person. This person should be the main contact and must be
able to easily understand the customer’s specific situation. It is also important that the
employees can approach different people accordingly. In order to do so, it is of great
importance that the employee is very open-minded but also well oriented in agricultural
matters. The active agricultural enterprises all think that this person should approach the
customers frequently, for example once every year or once every second year, in order to
ensure that the customers have the cover they need. However, respondent 4 have not received
this contact in many years and is unaware of who his contact person is, which he states as a
clear problem. Furthermore, most of the respondents perceive it as important that the
employees have a good knowledge of the product they are selling to ensure credibility. Also,
31
because of the complexity of the matter, this is of great importance in order to be able to
explain the products to the customers.
Telephone meeting
When contacting the company via telephone, all respondents seem to believe that it is not a
very big difference compared to the customer meeting. Though, it is important that it is easy
to get in touch with the company. Those of the respondents that are aware of who their
contact person is, all perceive the availability as very good. These respondents tend to use this
person to get in touch with the company. However, respondent 4, 6, and 8 are not aware of
who their contact person is and find the availability insufficient. These respondents also
points out the telephone central as complicated. Respondent 4 clearly states “The telephone
central is very complicated to get through, and I think it is hard to get in touch with the right
person”.
Internet
Internet is mainly used for gathering information about insurance. Respondent 3, 4, 8, 9, and
10 would all be willing to use internet tools as a complement to the personal meeting and
telephone contact, to review their insurance. The other respondents are firmly unwilling to do
so with complexity as their main motivation. These respondents state the importance of the
personal contact in order to be able to deal with questions and to understand the consequences
of a certain change. Respondent 6 believes ”I think that these matters require a personal
contact. For example, if I were to do any changes in the insurance, I want to be certain that I
know the consequences of this action. These kinds of questions always pop up, and I think
that you need a person to discuss this with”.
Respondent 3 think that the webpage does not deliver the information that customer’s request.
For instance, he where unable to find the telephone number to a certain employee, which
according to the respondent is of great importance.
Proactive claims activities
In the proactive claims process, the knowledge of rules and standards is perceived as the most
important matter by the respondents. Customers usually contact the proactive claims
representative in the middle of an on-going process, which in turn generates the need for
quick and accurate answers. The on-going proactive work that Länsförsäkringar is carrying
out is received with mixed feeling by the customers. Mainly, all argue that this process is
necessary for the benefit of all parties, in terms of the reduced number accidents and claims.
Many respondents state that it is easy to become unaware of this type of problems at the farm
or in their home. Furthermore, respondent 2 points out that the method of contributing money
when installing residual current devices is a good and efficient way to accelerate change.
However, sometimes the customer does not appreciate the necessity of the measure. For
example, it can be perceived as overly cautious and that the cost of the measure does not
respond to the benefit. In this case, proactive claims are recognized as unnecessary.
Respondent 3 describes this as “You do not have to build a rabbit hutch out of concrete”.
Moreover, this problem becomes more significant since many customers feel that the
premium continues to increase.
The Säker gård-concept is considered an appealing notion by the respondents, and a good
way to reduce both risk and cost of insurance. All interviewees are aware of the concept and
most of the respondents have already got, or is well on the way towards certification.
Respondent 10 had undergone this certification process. This was something that the
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competing firm took into account in their offer which in the end made the premium even
lower than it would have been without the certification.
4.2.5 Employees
All respondents think that Länsförsäkringar’s employees have a good knowledge about the
agricultural market and the condition at farm level. They also think that the employees have a
good knowledge of the products they are selling and that they can adapt these products to
each specific customer’s situation. The majority of respondents also perceive the employees
as very service minded. Moreover, the respondents clearly state that the employees do not
have to be experts in all areas but it is important that the respondents have someone to turn to
with their questions. Respondent 2 point out that Länsförsäkringar’s employees are very
visible in the agricultural insurance market, which is perceived as very positive. For example,
they often attend agricultural exhibitions and other agricultural gatherings.
Most of the respondents are unable to point out any weaknesses among the employees.
However, respondent 9, who is no longer using Länsförsäkringar as insurance company, tells
about how he at first was very satisfied with the level of service from the local representative.
When this representative retired, he was informed that a new representative would take care
of his insurance from now on. From then, he has not heard from Länsförsäkringar, and
because of this, he decided to leave the company.
4.2.6 Structure and organisation
The fact that Länsförsäkringar is operated as a local company, with its base in Uppsala, is not
thought of as a significant advantage by the respondents. On the other hand, all respondents
believe that it must be easy for the company’s representatives to visit the customers. For this
reason, the idea of the local representative organisation is perceived as very positive. The
respondents believe that it would be easier to get in touch with the local representatives rather
than going via the telephone central, but also that it is very favourable that the local
representatives are well aware of the specific local conditions. However, respondent 7 think
that it may feel uncomfortable to commend a neighbour with this type of personal
information. Also, most of the respondents that have previously had contact with the local
representatives think that this does not function adequately anymore. Foremost, many
respondents are not aware of that the local representative organisation is still functioning, and
keeps referring to the old local representative organisation. For example, respondent 3 states
“I think the time for the local representative organisation has past, and I am not sure whether
it still exists”. Furthermore, some respondents state that local representatives are not
sufficiently active in the market.
None of the respondents states that the fact that Länsförsäkringar is owned by its customers
has been imperative in their choice of insurance company. However, none of them think that
this is negative in any way and respondents 4 and 7 mention this organisation structure as a
competitive advantage. Also, none of the respondents perceive themselves as owner of the
company.
4.2.7 Social and environmental responsibility
All of the respondents except respondent 7 unite in the opinion that Länsförsäkringar take
important environmental responsibility through their collection of scrap material, chemical
waste and electronic waste. This service is perceived as a significant additional value and is
very appreciated by the customers. None of the respondents were able to answer the question
whether Länsförsäkringar takes any social responsibility relevant to the agricultural sector.
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Finally, all respondents argue that Länsförsäkringar’s social and environmental responsibility
is not a decisive factor in their choice of insurance company.
4.2.8 Brand
The majority of the respondents find it difficult to answer what Länsförsäkringar’s brand
represent. However, most respondents think that Länsförsäkringar has a strong historical
connection to agricultural insurance. These respondents believe this adds credibility to the
brand. Länsförsäkringar is not viewed as a low-cost alternative but rather as a stable and
secure company. Generally, all respondents believe that Länsförsäkringar has a very good
reputation and respondent 6 state; “they would not have as dominating market share if they
did not have a good reputation”.
Respondents 4, 9, and 10 states that many of the competing firms have stronger positions in
other areas of the country. Therefore, many of the competing firms are not perceived as new
companies, which in turn increase their credibility.
4.2.9 Why customers choose a certain insurance company
The respondents from the active farm enterprise-segment emphasize the knowledge of the
agricultural sector as a crucial factor in their choice of insurance company. It is also important
that the customers feel comfortable with their contact person. Furthermore, many respondents
point out the price, and that the price cannot differ too much from the competitors’ price.
Respondent 4 puts this as “A low premium is of course important, as a business man you want
to spend as little money as possible. However, the premium must not be lowered at the
expense of what I get back from a claim”. The price must be put in relation to what you
expect to receive from a claim. Finally, the customer must feel confident in the belief that the
insurance company will be fair when appraising a claim.
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5 Analysis and discussion
The following chapter aims to analyse the empirical findings from the perspective of the
theoretical framework. This means analysing Länsförsäkringar’s strategy in relation to
collected data from customers, with the theoretical framework as the foundation. The analysis
is based upon the factors identified in Länsförsäkringar’s strategy.
5.1 Structural changes in the agricultural market
The agricultural market is undergoing a considerable change. The business risk at farm level
has increased, mainly because of increased variance in product prices and increasing prices on
inputs, which in turn generates a higher need of external financing. The underlying factors to
increased risk at farm level are changes in the farmer’s macro-environment, such as
technological developments, global economic factors and environmental changes. Statistics
show that the average farm size in Sweden is increasing (SJV 2011:33). According to Schurle
and Tholstrup (1989), this is a result of the farmer’s increased risk exposure. This has
implications for the Swedish agricultural industry which in turn affects the market where
Länsförsäkringar operates (Johnson et al., 2011). Since the business risk among
Länsförsäkringar´s customers have increased, it is likely that the demand for insurance will be
stable or increase in the future.
5.2 Products
Länsförsäkringar’s strategy emphasizes that the products must be well adapted to each
segment of customers in order for the firm to be attractive. The employees also seem
confident that this is the case and believe that the products are well suited for the different
segments, mainly because of the undertaking of the MIL-process. The opinion among the
customers is also that Länsförsäkringar has a sufficiently extensive product portfolio. The
non-active segment considers the products understandable and well suited. The large-scale
farm enterprises states that there are products that matches their increased complexity and
more extensive operations. This implies that Länsförsäkringar has succeeded with dividing
the market into segments, and also that Länsförsäkringar understand what the different
segments require in terms of products, according to Kotler’s theories of market segmentation
(1999). The on-going development in the agricultural market is believed to follow the current
path, where the number of non-active farm owners will increase, and that the active
enterprises will grow larger and become more complex. This points towards that the
segmentation will continue to be suitable in the future. This means that Länsförsäkringar have
managed to adapt their products to the changing market in a good way, and that this is likely
to maintain in the future.
The empirical findings also points to that the products conform to specification. Prajogo and
McDermott’s study (2011) proposes that this is not very important however, all respondents
states that this is an important feature to maintain credibility. The reason is that the customers
cannot know in advance what they will get in terms of a claim, which makes trust very
important. So in order to motivate a high premium, it is important that Länsförsäkringar
makes their customers secure in the belief that they would be treated fairly in case of a claim.
The products themselves are not to be considered a sustainable competitive advantage
according to the Barney’s VRIN-framework (1991), mainly because it is easily duplicated by
competing firms. The respondents who have left Länsförsäkringar clearly state that they
cannot perceive any differences when comparing Länsförsäkringar’s products with the
competitors’. However, they all believe that the area of insurance is too complex to grasp any
35
differences. This further demonstrates that the products are not a source of competitive
advantage. However, the products are the foundation of Länsförsäkringar’s operations, and
having products that are well suited for the customers’ needs is imperative for performance
and trust. In order to maintain a well suited portfolio of products, it is important that managers
are aware of on-going changes in the market and try to understand the environment (Johnson
et al., 2011).
5.3 Market strategies
In their strategic documents, Länsförsäkringar emphasizes that it is of great importance to find
agricultural enterprises that are undergoing change. The reason is that this is a great
opportunity to offer the customers Länsförsäkringar’s financial services and other additional
sales. However, according to the empirical findings Länsförsäkringar do not own the
resources required to find such farmers, as stated by Grant’s resource-based theory (1991).
Hence, this part of Länsförsäkringar’s strategy is not based upon the firm’s resources and
therefore not very suitable. The reason is that Länsförsäkringar is no natural partner for
farmers that are planning a change. If Länsförsäkringar are to achieve their strategy to any
greater extent, they have to establish cooperation with firms that own the resources that
Länsförsäkringar do not, in this case a firm that is a natural partner of a changing process at
farm level. Though, some of the customers approach Länsförsäkringar at an early stage of this
process, for example to receive information from the proactive claims department. Therefore,
it is of great importance that Länsförsäkringar work actively with additional sales in these
cases and also that the proactive claims department are familiar with Länsförsäkringar’s
financing solutions.
Länsförsäkringar´s market strategy further states that the non-active segment requires more
consulting. However, the perception from the empirical study points to that the segment is in
more need of contact rather than consulting. It has clearly shown that the customers that are
the most content with Länsförsäkringar as their insurance company are those who are aware
who their contact person is, while those who are not aware of this, are more discontent. This
is valid for all segments. This means that this activity is of particular importance to deliver
customer value according to Porter’s value chain theory (1985). In one of the interviews at
corporate level, it emerged that the company does not have a clear strategy of how to process
all segments. The empirical findings indicate that the customers want a personal contact, this
is especially important for the active enterprises, but also for the other segments. The
processing of the non-active segment is not working sufficiently well, according to the
empirical data. In order to establish a relation to the customers in this segment,
Länsförsäkringar need to restructure the organization to approach them. In this case, the local
representatives constitute a suitable solution. The local representative organization is
perceived as valuable by the customers, and the organization aligns with Länsförsäkringar’s
strategy, which states that the local attachment is important. Although, most of the customers
do not know that this organization is still operational. Hence, the local representatives must be
more active in the market. Also, Länsförsäkringar must be better at pointing out this
organization. To achieve this, the local representative organization needs more guidance from
Länsförsäkringar of how to operate in the market, which according to Porter (1996) is a
managerial question. The part-time enterprises also need more attention, according to the
respondents at corporate level. As mentioned earlier, their needs are similar to those of the
large-scale farm enterprises, and therefore Länsförsäkringar need to have clear strategy of
how to approach them.
36
Furthermore, the large-scale farm enterprises really appreciate the annual meeting and
consider this a great opportunity to discuss insurance matters. In the large-scale farm segment
the processing functions well, however in those cases an active customer has been neglected,
the discontent is very substantial. The reason is that this level of service does not match to
customers’ expectations on Länsförsäkringar. In Länsförsäkringar’s strategy, it is obvious that
the company has chosen what Porter (1985) would call a differentiation strategy. This means
that the company has positioned themselves as a provider of high-quality service, which is
believed to be a unique value to the customers. When choosing such a strategy, it is important
to stay consistent to this. If Länsförsäkringar are unable to motivate the additional premium
connected to this strategy, this creates discontent among the customers who pay the additional
premium. If Länsförsäkringar fail to deliver additional value to many customers, this will
undermine the company’s reputation according to Porter (1996). Hence, it is important to
maintain a good relation with their large-scale farmers.
This implies that it is very important for Länsförsäkringar to approach all customers and
inform them who they should contact if they have any questions about their insurance. If
Länsförsäkringar are to be able to motivate their higher premium in the future, it is of great
importance that they deliver customer value. As the interviews clearly shows, having a
contact person is considered an important value. For instance, all respondents that have
altered insurance company did so because they were unable to see the benefits connected to
Länsförsäkringar’s higher premium, such as high level of service. Prajogo and McDermott
(2011) states that customer retention is very important. The reason is that the cost of finding
new customers is greater than retaining the current customers.
At the interviews at corporate level, the solution of using internet as an additional channel for
processing customers was mentioned. The empirical data from the customers indicates that
this can be a good complement to a personal contact, especially among the younger
respondents. However, the respondents that have more extensive and complex operations
within their company tend to be more unwilling to use this tool. Also, it is not believed that
this can replace the personal contact. This indicates that this can be a valuable resource in the
future, especially for processing the non-active and the part-time segments.
5.4 Synergies
Länsförsäkringar’s strategy focuses on the fact that the company provides all financial
services under one roof. The strategy also states this as a competitive advantage. All of the
respondents are also aware of the fact that Länsförsäkringar provides both banking and
insurance services. However, none of the responding customers are able to see the advantage
of this organisation. The respondents think that banking and insurance are two completely
different matters, and that you contact different people for different matters. This means that
Länsförsäkringar has failed to communicate the advantages of this organisation to the
customers. The main reason for this failure is the ineffective in-house work. For instance, the
respondents who use both services believe that there is a lack of collaboration between the
two departments. The employees are also aware of this problem and states that a lot more
could be done in-house, and points out joint customer meetings as part of the solution.
According to Porter’s theory of sustained competitive advantage (1996), it is essential to
create fit among activities. In order to make Länsförsäkringar’s resources, i.e. providing both
banking and insurance services, a sustained competitive advantage, it is essential to increase
interaction between the two activities and create fit among them. In conformity with Porter
(1996), Grant (1991) states the importance of coordinating and combining resources. Grant
states that few resources are valuable on their own, but by combining and coordinating these
37
resources, the result becomes more unique and harder for competitors to imitate. For example,
fit or coordination between the mentioned resources can be achieved by increased number of
joint customer meetings, increased collaboration between banking employees and insurance
employees, increased training in other area, and an increased focus and training in customer
service.
In the market strategy, Länsförsäkringar states that customers that use both banking and
insurance services tend to stay longer within the company and also tend to be more content
with the company’s services. However, since many respondents are unable to see the benefits
of having one company, this advantage is hard to prove. For instance, one respondent is very
content with Länsförsäkringar’s banking services but not with the insurance services. This
respondent states that he would gladly change insurance company to a competing firm.
Hence, Länsförsäkringar must enhance the benefits of using one company in order to make
these customers more loyal to the company.
In order to make customers more willing to use Länsförsäkringar as their only provider of
financial services, Länsförsäkringar has introduced the concept of Helkund. This concept is
connected to economic discounts when using a certain combination of Länsförsäkringar’s
services. Two of the respondents at corporate level perceived this discount as too insipid and
that when they approach a large-scale farm enterprise, the sum of the discount seems to have
little effect upon the customer. However, all customers that receive the discount perceive it as
sufficient. The respondents also think that Länsförsäkringar are very good at pointing out
these discounts and also that the discounts make you think twice before leaving
Länsförsäkringar. This points to that there is nothing wrong with the level of the discounts.
However, it does not seem sufficiently high to persuade customers that have established a
good relation to another bank to switch to Länsförsäkringar, since most of the respondents
states that they remain firmly unwilling to switch bank, regardless of the discounts.
It is conceivable that the largest benefits of the solution of offering both financial and
insurance services lies within the company, and that the decision to start banking activities is
only based on these benefits. Hence, the only reason why banking operations was introduced
might have been to benefit the company and not the customers. For instance, the capital
structure might be suitable for the current operations. However, the strategy clearly
emphasizes the customer’s benefits of this organisation, and disregard from internal benefits.
If the motives of the organisation were internal, it is still most important to convince the
customers of the benefit of having all services at Länsförsäkringar, otherwise the operations
would not survive. Hence, it is suitable that the strategy only focus on the customer’s value.
5.5 Perceived competition
The respondents at corporate level believe that Länsförsäkringar’s competitive advantage over
its competitors is based upon superior service. Also, from the company’s strategy it is
possible to deduce that the firm seeks differentiation by delivering high-quality service in
accordance with Porter’s theory (1985). This service is constituted by the local attachment,
the good knowledge of agriculture, and the preeminent proactive claim activities. The
respondents at corporate level believe that the competitors’ only advantage over
Länsförsäkringar is the price. However, the empirical data collected from the respondents
who have left Länsförsäkringar points to that they receive almost the same level of service
from the competitors. Also, they have received this service at a far lower price.
38
Porter’s five-force framework (1985), describes the competitive rivalry within an industry.
The structural changes in the agricultural market are believed to have an effect upon the
competition within the industry. For instance, as the number of active agricultural enterprises
decreases and becomes more extensive, the significance of each individual company is likely
to increase. This means that the bargaining power of the buyers will increase and thereby the
rivalry within the industry. Many of the respondents perceive the competition in the market is
too low, and that they gladly welcome competing firms. Further, many respondents believe
that tradition will play a less significant role and importance of performance and price will
increase in the future. This implies that the customers will be more likely to switch insurance
company which in turn further will increase the buyers bargaining power. Also, since the
local agricultural insurance market, i.e. the county of Uppsala, is totally dominated by
Länsförsäkringar in terms of market share, it exists opportunities for competitors to enter the
market. Many respondents also believe that the competition will increase in the future. Hence,
the threat of entry is likely to increase the competitive rivalry in the future, according to the
five-force framework (Porter, 1985). However, the possible substitutes for Länsförsäkringar’s
products are few and the bargaining power of the suppliers is relatively insignificant. Another
factors that is believed to increase completion, but is not connected to the five forces
framework, is the fact that when active enterprises grows larger, the significance of each
individual machine will increase. This means that the farmer depends on having all machines
operational during the harvest since the cost of not being able to use the machines at a specific
point in time increase with the farm size. This implies that this segment will increase their
demands on their insurance company in terms of quick response rate, etcetera. Therefore, it is
more likely that customers are willing switch insurance company if the company cannot meet
their standards. All these aspects combined point towards that the competition in the market
will increase.
Hence, it is of great importance that Länsförsäkringar can motivate their higher premium if
they are going to maintain their current strategy of delivering a high level of service. In
accordance with Porter’s theory of strategy (1996), this means that Länsförsäkringar has to
trade off price in order to achieve high quality. This is a suitable strategic decision because it
differs Länsförsäkringar from its rivals. Again, if Länsförsäkringar are going to maintain
trustworthiness in their brand, they can never sacrifice quality and knowledge of agriculture
under any circumstances. However, this strategy means sacrificing a part of high market
share, where customers that are price sensitive are going to choose a low-price competitor.
Further, it is important to state that most of the respondents are content with Länsförsäkringar
as their insurance company. These respondents emphasize their good relation to
Länsförsäkringar which has been developed over many years. They also highlight the good
service that Länsförsäkringar offer. These customers clearly believe that the higher premium
is motivated.
The concept of Säker Gård is perceived by the customers as a good way to reduce both risk
and cost of insurance. The problem with the concept is that it is easily duplicated by the
competitors, and according to Barney (1991) this could therefore never be a source of
sustained competitive advantage. This means that a customer that have undergone the process
together with Länsförsäkringar can receive an offer from a competing firm that are aware of
the fact the that the customer has undergone the certification process. Hence, the competing
firm can offer a lower premium, and also avoid the consultation cost that occurs during the
certification process. If the concept is going to be a sustainable competitive advantage, it is
crucial that Länsförsäkringar can tie the customers to the company for a longer period of time.
39
5.6 The sales process
Customer meeting
The customer meeting at the farm is considered a great opportunity for Länsförsäkringar to
meet with, and build a relation to their customers, according to the employees. This
particularly important because of the complexity of the insurance matters. All customers
agree that this is the case, and stress the importance of having one specific contact person who
they can always approach. Further, the customers emphasize the fact that the employees must
be able to tackle different people accordingly. It is also stated in Länsförsäkringar’s strategy
that customer orientation is of great importance. Again, as Porters theories on strategy (1996)
states, if Länsförsäkringar are going to maintain their high quality strategy, one important
issue is to ensure that the customers have a special contact person and that they are able to
receive a customer meeting if they think that it is necessary. Moreover, the empirical findings
clearly show that customers who have not received this contact are more discontent with
Länsförsäkringar and are having trouble seeing the benefits connected to Länsförsäkringar’s
higher premium.
All respondents at customer level state that it is very important that the employees have a
good knowledge of agriculture, both at operational and strategic level. The respondents at
corporate level are well aware of this fact and they also believe that Länsförsäkringar can
provide this. Given that Länsförsäkringar can maintain this high competence, it can be a
source of sustained competitive advantage, in accordance with the VRIN-framework (Barney,
1991). This reason is that this is valuable in the sense the customer appreciate it, it is
relatively rare within the market, it has a unique historical connection to Länsförsäkringar and
is thereby hard to imitate. Finally, it is not easy to substitute unless the competitor put a lot of
efforts on education and recruiting new employees. Hence, it is of great importance that
Länsförsäkringar continue to recruit staff that has a good knowledge of agriculture.
Telephone meetings
The telephone meeting is considered a good complement to the meeting at farm level, by the
employees. It is far more effective in terms of both time and cost compared to the personal
meeting, and the customer still receives a personal contact. The opinion among the customers
reflects Länsförsäkringar view rather well. Further, the customers who are aware of who their
contact person is, are generally more content with function and availability of this channel.
However, those who are unaware of who their contact person is, usually think that the
availability is unsatisfying and that the telephone central is complicated. Again, it is of great
importance that Länsförsäkringar are clear in specifying who the customer should contact
with questions about their insurance. Hence, this is an activity that is of particular importance
because it creates customer value (Porter, 1985).
Internet
The internet is currently not used for any sales but rather a source of information for the
customers. It is important that the information is presented in a simple and clear way. One
respondent clearly states that he is not satisfied with the way information is presented at
Länsförsäkringar’s webpage. In the future, Länsförsäkringar states that an introduction of
processing tools on the internet is possible. About 50 % of the respondents believe this is
something they would use and believe that this is a good complement to the personal contact.
As mentioned earlier, it is mostly the younger respondents and the respondents that have
relatively uncomplicated activities within their firm who are positive to this type of service.
40
Hence, it is of great importance to develop this channel in order to make a competitive
advantage and deliver customer value in the future (Porter, 1985).
Proactive claim activities
According to Länsförsäkringar’s strategy, proactive claim activities are considered a very
important service. The reason is that this will help to reduce the number of claims, and
thereby the cost of claims paid to customers. Further, it is important because it is a great
opportunity to build a relation to the customers and thereby build trust, but it is also a great
opportunity for additional sales. However, the respondents at corporate level believe that sales
via this channel are struggling. If the company are to increase sales via this channel,
management must support this activity, according to both Porter (1996) and Nwankwo
(1995). The customers believe that the most important feature of this service is quick and
accurate answers. The on-going proactive claim process is mainly considered positive and a
good way to reduce risk at farm level. However, in some points the process is perceived as
overly cautious and that the cost of the measure does not respond to the benefit, especially
since many customers believe that the premium keeps on rising. Still, most respondents
consider this a value-adding activity, and according to Porter (1985), this is thereby
something that Länsförsäkringar should focus on. Also, the proactive claim activities at
Länsförsäkringar are perceived as more extensive than the competitors’, and thereby an
important competitive advantage.
5.7 Employees
The respondents at corporate level believe that the strength among the employees is that they
have a good knowledge of agriculture. This aligns with the perception among customers. The
empirical data indicates that this is an important customer value, mainly because it increases
the credibility of the company and it also makes the employees understand the customer’s
situation better. This is a valuable part of the value chain (Porter, 1985) and thereby an
advantage that Länsförsäkringar must maintain. This can be maintained by education and by
focusing on this quality in the recruitment process.
Länsförsäkringar´s employees states that it becomes harder for them to be experts in both
banking and insurance matters when the complexity of the products and the scale of the
production at farm-level increase. However, they point out that it is necessary to have broad
base of competence in order to find sales opportunities, but still be specialized in one area.
The customers clearly states that the employees do not have to be experts in both areas, but
have to care for the customer service. Most of the responding customers are happy with the
level of service, particularly those who have a person within the company whom they can
contact with their questions. Hence, this is something that adds value to the customers (Porter,
1985), and as mentioned earlier it is important to have one person within the company that
they can contact.
Länsförsäkringar’s strategy accentuates the success of the implementation of customer
orientation. This belief may be deceiving because it can create an illusion of that the company
is proactive, when in fact they are content with the current situation and believe that no more
needs to be done. Even though this is not the belief among those who write the strategy, it
sends signals to employees that this question no longer needs focus. According to Nwankwo
(1995), it is very difficult to achieve this strategy. Also, if a company achieve customer
orientation, it is very hard to sustain. Customer orientation can only be attained by focusing a
lot of efforts on achieving this, and the role of the management is crucial. Nwankwo (1995)
proposes a framework in order to evaluate the degree of customer orientation, where he states
41
that it is important to continuously scan the market in order to understand the environmental
signals. Also, it is important to measure if the customer orientation strategy is working as
intended and how the strategy is turned into action. However, the employees believe that there
is still a lot to do, and mention that Länsförsäkringar have to increase focus on education and
awareness of customer needs. This means that the strategy is not accurately formulated, when
stating that the company has achieved customer orientation. Instead, the strategy should focus
on how to take measures to achieve customer orientation. Moreover, the empirical data
indicates that the customers are very satisfied with the products but not always equally
satisfied with the level of service, this further proves that the company still has a lot to do in
terms of customer orientation.
5.8 Structure and organisation
One of the fundamental parts of Länsförsäkringar’s strategy is the local attachment. The
company’s concept is to be as close to the customer as possible and the strategy clearly states
this is the best way of dealing with customer service. The companies within the
Länsförsäkringar group have own decision-making authority and are responsible for their own
market operations and financial performance. The local attachment is considered a unique
competitive advantage in the strategy. However, the respondents believe that the fact that the
company is local, and have its decision makers in the same area as the customers, do not add
significant value to them. Many argue that the organisation would still have had a local office
within the area even if it would have been a national company, and that this would have
fulfilled the same purpose. The customers think that the important part is that the employees
can easily visit the customers and that claims can be handled easily. If Länsförsäkringar
consider their local attachment to be a competitive advantage, they have not succeeded in
communicating the benefits of this to their customers. According to Porter’s theories on
strategy (1996), it is crucial to communicate the strategy to all stakeholders, which means that
Länsförsäkringar must focus on informing the customers of how this will add to the customer
service.
A way of ensuring the local connection and that Länsförsäkringar is always close to the
customers, is the local representative organisation. This organisation has been a very
important part of Länsförsäkringar´s historical success and a part of Länsförsäkringar´s
competitive advantage. All responding customers think that the notion of this organization is
very appealing, and that this channel has a good potential. However, the general perception
among both the employees and the customers is that the organisation does not work
satisfactorily. The customers believe that this organisation is not sufficiently active and many
of the respondents speak of this organisation as if it no longer exists. The employees points
out lack of control and cooperation between the company and the local representatives. This
makes it very difficult for the representatives to follow the developments in the market and it
also obstruct the representatives to be a part of Länsförsäkringar. Since the local
representative organisation is something that the customers appreciate, this is potentially a
sustainable competitive advantage in accordance with Barney’s VRIN-framework (1991). The
reason is that it would take a long time for the competitors to establish a similar organisation,
and the organisation also has an important historical connection to Länsförsäkringar as well as
being valuable. Further, the organisation is relatively unique in the market and there are no
equivalent substitutes. Hence, this organisation must be developed in order to be an efficient
advantage. To achieve efficiency, it is important that Länsförsäkringar take an active part in
guiding the representatives and that the management communicate Länsförsäkringar’s
strategy to the representatives (Porter, 1996). It is also important to tie the representatives to
42
the company and make them feel as a valuable part of it. Finally, education can be an efficient
way to achieve this, and also ensuring a sufficient level of knowledge.
Another fundamental part of Länsförsäkringar’s strategy is the fact that the company is owned
by its customers. According to the strategy this is the core of Länsförsäkringar’s customer
orientation. The employees believe that this ownership structure is to be considered a bonus
but they do not think that it has any significant effect in the customer’s choice of insurance
company. All of the responding customers think that this structure is a positive feature,
however only two of them consider this to be a competitive advantage. If Länsförsäkringar
consider their ownership structure to be a source of customer orientation, they have not
succeeded in communicating the benefits of this to their customers. According to Porter’s
theories on strategy (1996), it is decisive to communicate the strategy to all stakeholders,
which means that Länsförsäkringar must focus on informing the customers that this structure
enables superior customer orientation which is the most preferable.
5.9 Social and environmental responsibility
The respondents at corporate believe that Länsförsäkringar´s work on social and
environmental responsibility is something that have no effect on sales. However, they all
believe that this is something necessary for any company in order to ensure credibility. The
customer on the other hand points out Länsförsäkringar’s environmental work as a significant
additional value. Foremost, they appreciate the collection of scrap and chemical waste from
the farms. Hence, this is considered an additional value and thereby an important part of the
value chain. However, it is likely that if this is something that Länsförsäkringar’s competitors
consider to be a competitive advantage, it is easily duplicated, because it is one individual
activity, and this can thereby never be the source of a long run competitive advantage
according to Grant (1991).
5.10 Brand
According to Länsförsäkringar´s brand strategy, the central values connected to the brand are
the local attachment, that the company is customer owned, and that the company has a longterm perspective. Further, the company want customers to associate the brand with
praiseworthiness and additional values, but also that the company is perceived as nearby and
quickly responding. The employees believe that the customers in the agricultural segment
associate the brand with good knowledge of the agricultural market. The customers agree with
this, and believe that the brand symbolizes a strong historical connection to agricultural
insurance and a good knowledge of this market. The brand is not connected with a low-cost
strategy, but rather stable services and high quality. According to Prajogo and McDermott
(2011), brand image is an important factor for success, and the article states that it is
important for firm’s to focus on brand image. The reason is that brand image is an efficient
way to achieve competitive advantage, and something that is of great importance in service
organisations. According to Kotler (1999), brand image is characterized by good reputation
and being well-known, which is something that Länsförsäkringar seem to have achieved in
the agricultural market. Thus, this makes Länsförsäkringar’s brand a competitive advantage,
especially when choosing a differentiation strategy, and because it fulfils all VRIN-criteria,
this advantage can be sustained (Grant, 1991).
5.11 Why customers choose a certain insurance company
On the question why the employees believe that customers choose Länsförsäkringar, they
state that trust is the most important factor. Further, they believe availability and simplicity
43
are determining factors. The responding customers believe that the most important factor is
knowledge of the agricultural market and a good connection with their contact person. The
empirical data also indicate that praiseworthiness as very important, and the respondents
clearly state that the price cannot differ too much compared to the competitors. Still, the
employees believe that they can charge a higher price than the competitors. The employees
believe that Länsförsäkringar provide a superior service, and thereby motivate the higher
price. However, this strategy requires that Länsförsäkringar always deliver high quality. In the
cases where Länsförsäkringar has failed to deliver high quality, this has created inconsistency
between the customers’ expectations and the delivered service. Porter (1996) states that this
can treat the firm’s reputation and thereby undermine their strategy. Further, the empirical
data indicates that Länsförsäkringar must focus more efforts on achieving customer
orientation.
44
6 Conclusions
The following chapter attempts to answer the research questions formulated in the aim;
The aim of the study is to investigate whether the agricultural division of Länsförsäkringar
Uppsala experiences any strategic drift. The objective is to provide an understanding of the
customers’ view on services related to agricultural insurance and financing. These results are
then compared to Länsförsäkringar’s view on customer services by studying the company’s
strategic framework. The study attempts to address the following research questions;
1. Is Länsförsäkringar Uppsala’s strategic framework suitable given the company’s
characteristics and resources?
2. Which of Länsförsäkringar Uppsala’s services contribute significantly to the perceived
customer benefit?
3. Is Länsförsäkringar Uppsala’s strategy corresponding to the customer’s view on
customer value?
Reliability and validity
The validity of the study is considered to be satisfying. The main reason is that the empirical
data has been collected from case studies, which facilitates a discussion of the interview
questions with the respondents.
The reliability of the study is harder to assess. Since the results of the study are based upon
interviews, the answers reflect the individual respondents’ standpoint. This means that it is
difficult to confirm if the answer reflect the general opinion. However, reliability is sufficient
in the sense that the aim of the study was to identify which factors those are important to the
perceived customer value, which was achieved. Also, the saturation level from the interviews
was perceived as good. In order to determine which factor is the most important, an additional
study using a survey would be required. This would strengthen the result from the case study
and it would enable to draw more general conclusions.
Changes in the market
After analysing the industry in accordance with Porter’s five forces framework, it is clear that
the competition in the local market is likely to increase. Therefore, it is very important that
Länsförsäkringar pay attention to the changes in the market and that they critically examine
their own capabilities. In a situation where the firm’s environment is changing, it is of
particular importance that the management is not deceived by the firm’s historical success.
Otherwise, the risk of strategic drift is imminent.
Is Länsförsäkringar Uppsala’s strategic framework suitable given the company’s
characteristics and resources?
A suitable strategy for a firm is a strategy that creates a unique and valuable position in the
market and that the firm adapt activities that enhance this position. These activities must also
be based on the firm’s resources. To begin with, Länsförsäkringar’s strategy states that the
products are important to achieve attractiveness. This is true in the sense that the products
constitute the core of Länsförsäkringar’s services, and without them, the business would not
exist. Hence, the formulated strategic direction regarding the products is accurate in the sense
that it states the importance of having products that are well suited for customers’ needs.
However, the products themselves are not to be considered a source of competitive advantage.
45
Länsförsäkringar’s strategic document states the importance of finding agricultural enterprises
that are undergoing change. However, all empirical data points towards that this is hard to
achieve given Länsförsäkringar’s resources. To formulate a strategy that is not based upon the
firm’s capabilities is not desirable and therefore, this part of the strategy is not suitable. If
Länsförsäkringar believe that finding agricultural enterprises in change is decisive for the
future performance, the company needs to establish cooperation with companies that possess
these resources. For instance, establish collaboration with consulting companies that are a
natural partner for farmers in this process. In the present, it is important to take advantage of
the opportunities that face the company today. For instance, customers who seeks advice from
the proactive claims department.
Another important part of Länsförsäkringar’s strategy is that they provide both banking and
insurance solutions. The idea of this strategy is to increase the perceived customer efficiency,
and thereby customer benefit. However, the empirical data indicates that the customers cannot
see the advantage of having all financial services within the same company. The main reason
for this is that Länsförsäkringar has failed to achieve efficiency in-house, and thereby been
unable to persuade the customers that this offer is superior to the competitors’. Hence, the
most important issue is to create fit between these activities in order to enhance efficiency.
This can for instance be achieved by increased collaboration between the different
departments and increased efforts from management to forge the activities together. If the
company can achieve better fit among these activities, it will increase the perceived customer
value and thereby be the source of an important competitive advantage. Also, if this is
achieved, customers will stay longer within the company.
The strategic documents states that the proactive claims activities are an important part of
Länsförsäkringar’s service offer. The empirical data also suggest that this is something that is
appreciated by the customers. However, many respondents state that the measures must be
reasonable. This part of the strategy is considered important, not only to deliver customer
value, but also to reduce the amount of claims paid out. Further, it is a good opportunity to
build a relation to the customer, which is important according to the empirical study, but also
an opportunity for additional sales. However, the empirical findings indicate that this
opportunity is not fully exploited. Again, the role of the management is important to seize this
opportunity.
Länsförsäkringar’s strategy celebrates that the company has achieved customer orientation.
The empirical data indicates that this is not the case. Further, the theory states that customer
orientation is something that the company must always pursue. The celebration of this success
is thereby a misleading statement, which might have negative consequences on the pursuit of
customer orientation. Hence, Länsförsäkringar must continue to increase focus on delivering
customer value.
The brand strategy is connected to a number of central values. The empirical data indicates
that the brands signal the same values as company desire. When delivering a service that is
difficult for the customers to appraise, the brand image is very important. Theory also
indicates that brand image is an important source of competitive advantage. This means that
Länsförsäkringar´s brand is a positive feature, and according to theory, a good brand
reputation enables a differentiation strategy.
Länsförsäkringar´s differentiation strategy is considered to be well suited to
Länsförsäkringar´s capabilities. For instance, the organisation has a strong local attachment,
46
mainly because of the fact that the company is locally operated. Further, the company has an
extensive service and proactive claims organisation, which are well adapted for high level of
customer service. Based on these characteristics, the company has good opportunities to
deliver a high-quality service offer. However, the empirical data indicates that
Länsförsäkringar have to emphasize the benefits of this organisation more efficiently.
Which of Länsförsäkringar Uppsala’s services contribute significantly to the perceived
customer benefit?
The empirical data indicates that one of the most valuable services is that the customer has a
contact person within the company whom they can contact with questions. This is important
to enhance the customer’s personal relation to the company. This is especially important
among the active large-scale farm enterprises, probably because the insurance solution is
more complex, and the cost of insurance is more significant in these cases. This implies that it
is very important that Länsförsäkringar clearly communicates who each customer´s contact
person is.
Further, the processing of the segments is considered an important service, especially for the
large-scale farm enterprises, who really appreciate the annual meeting at the farm. The other
segments do not require the same level of consulting, but still appreciate an approach annually
or every second year. The processing of the non-active and the part-time segment can
preferably be done by the local representatives. Finally, it is important that the processing is
done by the contact person in order to enhance the relation to this person, and thereby the
company.
Another factor that is perceived as important by the customers is the knowledge of
agriculture. The empirical data indicates that the respondents believe that this is important in
order for the employees to tackle each customer accordingly. To be able to maintain this
advantage in the future, Länsförsäkringar should continue to focus on this in the recruitment
process, both at strategic and operational level.
Finally, other services that are considered important are the proactive claims activities and
Säker Gård concept. However, it is important that Länsförsäkringar focus on persuading the
customers to stay in the company after the certification process. Further, the collection of
scrap material and chemical waste is considered an important service, and thereby something
that Länsförsäkringar should continue to focus on.
Is Länsförsäkringar Uppsala’s strategy corresponding to the customer’s view on customer
value?
Länsförsäkringar has chosen a differentiation strategy, which attempts to create a unique
customer value by delivering high-quality service. This means that Länsförsäkringar has made
trade-offs in price in order to be able to achieve this service. The empirical data indicates that
Länsförsäkringar’s strategy corresponds rather well to the customer’s view on customer value.
However, when a company chose this strategy, consistency is very important. If the firm
cannot deliver a customer value that motivates the higher premium, the customers will be
very discontent. If the firm fail to deliver this value to many customers, the firm’s reputation
will be undermined. The empirical data show that in the cases where Länsförsäkringar have
failed to deliver one particular service according to expectations, the customer is generally
very discontent with the overall situation. This means that it is extremely important that
Länsförsäkringar focus on always achieving high-quality in their service delivery.
47
Strategic drift
The empirical study points to that there are no obvious signs of strategic drift. However, even
though the strategy corresponds well to the customers view on customer value, the empirical
findings indicate that the implementation of some parts of the strategy still needs attention. If
more attention is not focused on these factors, there is an increasing risk of strategic drift in
the future. The most important factors to focus on are;
•
•
•
•
A personal relation to the customers: One of the most important values for the
customers is to have a personal relation to the company. To achieve this, it is of great
importance that the customers are aware of who their contact person is.
Enhance synergies: It is of great importance to enhance the synergies between bank
and insurance operations and to convince the customers that this is a service that is
superior to the competitors’. The key factor to achieve this is to increase efficiency
and collaboration in-house.
The local attachment: It is very important to communicate the benefits of
Länsförsäkringars local attachment. It is also important to enhance these benefits.
This can be achieved by mobilise the local representatives, and make them more
active in the market.
High quality: Länsförsäkringar has chosen a differentiation strategy, that focus on
high quality over low cost. In order to maintain credibility, it is of great importance to
never fail in the delivery of this quality. Such a failure can in log run undermine the
company’s reputation.
The responsibility to handle these issues is primarily a managerial question. The managers
also have the responsibility to communicate any efforts undertaken to improve the strategy
and strategic direction.
48
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1.
Sveriges jordbruk i siffror (Swedish agricultural statistics), 2012-01-31,
http://www.sjv.se/amnesomraden/konsument/sverigesjordbrukisiffror.4.4ef62786124a
59a20bf800076016.html
Svensk Mjölk (Swedish dairy association), http://www.svenskmjolk.se
1. Koantal per besättning (The average number of cows per unit), 2012-02-22
http://www.svenskmjolk.se/Statistik/Mjolkforetaget/Koantal-per-besattning1/
2. Besättningsstorlekar i kokontrollen (Size per unit in the cow data control), 2012-02-22
http://www.svenskmjolk.se/Statistik/Mjolkforetaget/Besattningsstorlekar-iKokontrollen/
Personal messages
Ekström Erik
Head of banking operations, Länsförsäkringar Uppsala
Personal meeting, 2012-02-02
Johansson Anders
Head of agricultural insurance, Länsförsäkringar Uppsala
Personal meeting, 2012-02-02
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Appendix 1: Interview questions at corporate level
• Products
-Have you observed a change in the demand for products in order to adapt to the structural
changes in the agricultural sector?
-Has the structural changes led to a different supply of products? Which are the new
products?
• Synergies
-Is there a strategy for increasing the number of helkunder? (Written?/Protocol?)
-Is the offering sufficiently beneficial for agricultural enterprises?
-How does LF work to achieve more efficient meetings in order to emphasize the
synergies?
• Competition
-How do you judge competitors' offerings and services? Are you aware of the differences
between the competitors’ products/services and your own?
• Sales/Customer meeting
-On farm meetings
-Telesales
- Proactive claim activities
-What do you believe a customer perceives as valuable in the sale process?
-Has the structural changes led to a different approach in the sales process?
• The employees
-In which areas do you think LF has their core competence? (Services and Products)
-LF has changed from a product focus to a customer orientation. How has LF acted in
order to implement this among the employees?
• Social and environmental responsibility
-How do you work with environmental responsibility, relevant for the agricultural sector?
-How do you work with social responsibility, relevant for the agricultural sector?
• Market strategy
-How does LF work to find agricultural enterprises in change?
-Do you offer different products to each segment?
-How does LF approach different segments? (Message, distribution and proactive claim
activities)
• Other questions
-What do you believe is decisive when a customer is choosing insurance company?
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Appendix 2: Interview questions at customer level
• Products
-Do you think that LFs products satisfy the demand from modern/diversified agricultural
enterprises?
-Are there room for improvements?
-Do you think that you will demand more from your insurance company in the future?/
Different demand of insurance?
-Do the products conform to specification?
-Do you think LF is flexible when it comes to adapting their products to customer
specification?
• Synergies
-Do you think LF has informed you of the helkund offer? If yes, when where you
informed?
- Was the employee credible? What could he/she have done better?
- Is the discount sufficiently large?
- What are the advantages of having one company for all financial services? What
could have been done better?
- Do you appreciate the synergies? Are the meetings efficient enough to create
synergies? What could have been done better?
• Competition
-Have you been contacted by any of LFs competitors?
-Have you contacted any of the competitors?
-Why do you choose LF in front of any other insurance company?
• Sales/Customer meeting
-On farm meetings
-Telesales
- Proactive claim activities
-What do you think is valuable in the sale process? What could be done better?
-Do you think LF is sufficiently accessible?
-If yes, do you appreciate this?
-Do you think LF has been supporting you enough during the process of change?
- Too much?/ Too little?
- Do you appreciate this support?
• The employees
-In which areas do you think LFs employees have their core competence?
-In which areas lies their weakness?
- Is the knowledge of modern/diversifies agriculture sufficiently high?
• Social and environmental responsibility
-Does LF take responsibility for the environment? Is that important to you?
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-Does LF take responsibility for agricultural sustainability? Is that important to you?
• Other questions?
-Is the local attachment important to you?
-Have you had any contact with LFs local representative? If yes, is this important to
you?(Pros/cons)
-What do you think LFs brand represent?
-Did the brand of the company affect you in any way when choosing insurance company?
-Do LFs brand in any way differ from the competitors’ brand?
-Does the fact that LF is owned by its customer affect you in any way?
-What is the most important feature when choosing insurance company?
54